Global markets are entering the final days before the US midterm elections, scheduled for Tuesday, November 3, and are anticipating more than just a possible change in the balance of power within Congress. The outcome of the vote will largely determine President Donald Trump’s ability to continue his economic agenda during the last two years of his term, at a time when investors have begun to look beyond 2028, and to the extent of the continuity of the policies that have redrawn the economic, commercial, and geopolitical landscape since his return to the White House.
Prediction market bets indicate a clear lead for Democrats in the competition for the House of Representatives, with the race for the Senate remaining closer. According to data from Calci - the largest legal and federally regulated stock exchange and forecast market in the United States by the Commodity Futures Trading Commission - on October 28, the odds of Democrats controlling the House of Representatives were 91 percent, and the Senate was 66 percent. These probabilities remain bets that can change, and are not settled results, but they reflect traders’ expectations prior to the vote.
The importance of the result lies in the fact that Democratic control of one or both chambers may increase political and legislative restrictions on the Trump administration, and open the door to confrontations over government spending, the debt ceiling, tariffs, immigration and energy policies. On the other hand, Republicans maintaining control of both chambers will give the president more space to pursue his agenda, even if this in itself does not guarantee improved market performance.
For investors, it is not just a matter of determining which party wins, but also weighing the implications of each outcome for growth, inflation, interest rates, the dollar and oil, as well as the future of US politics as the 2028 presidential race approaches.
First scenario: Democrats regain the House of Representatives
Democrats winning the House of Representatives, with Republicans retaining the Senate, appears to be the scenario closest to the current market bets. In this case, Democrats will have broader oversight powers, including chairing committees, conducting investigations, and summoning administration officials, but their ability to transform their priorities into effective legislation will remain limited by Republican control of the Senate and Trump’s possession of presidential veto power.
This balance may be reflected in the economic files through increased confrontations over the budget, government spending, and the debt ceiling, especially if the two parties use these files to put pressure during the 2027 negotiations. Analyzes reported by Reuters warned that a confrontation over the debt ceiling may confuse the markets and increase investors’ uncertainty.
This scenario does not necessarily mean that Trump’s agenda will stop; The president will retain broad executive powers in files such as customs duties, immigration, and foreign policy, which limits the ability of Congress alone to change the course of these policies. But a Democratic majority in the House of Representatives may increase scrutiny of the administration's decisions and make passing some initiatives more difficult.
In the markets, the most prominent impact may be the increased importance of financial and political risks in asset pricing. A confrontation over the debt ceiling or government financing may increase volatility in the bond market, while stocks will remain more closely linked to corporate profit expectations, growth, and the cost of borrowing. There is no automatic outcome that forces stocks to rise or fall once control of the board changes.
Second scenario: Democrats control both chambers
If Democrats are able to capture the House and Senate, the constraints on Trump's agenda will be greater, because control of the Senate also gives them influence in committee work, voting on government and judicial appointments, and setting the chamber's priorities.
This could open the door to broader clashes over economic and trade policies, and make it more difficult to pass new initiatives that require congressional approval. Reaching agreements on the budget and debt ceiling may also become more complex, with the possibility of these files being used in political bargaining.
However, Democratic control of both chambers will not mean the end of Trump's ability to implement his policies. The president will retain veto power and broad executive powers, including important aspects of trade and foreign policy. Therefore, the shift will be in the extent of legislative restrictions and oversight, not in a complete transfer of executive power to the opposition party.
The longer-term impact on the markets may be a re-evaluation of the continuity of US policies after the 2028 elections. If investors see that the chances of the continuation of some of Trump’s trends are declining, they may re-evaluate the assets and sectors that have benefited from his policies, or that have been negatively affected by them, without this necessarily meaning an immediate reversal of market trends.
This possibility is of particular importance in energy issues, supply chains, and trade relations, in addition to American positions toward Iran, the Middle East, Ukraine, Russia, China, and NATO. The change in the balance of Congress may affect political support for some trends, but it will not alone decide the course of foreign policy.
Third scenario: Republicans keep Congress
In contrast, Republicans retaining the House of Representatives and the Senate will give Trump a broader opportunity to pursue his legislative agenda, and reduce the possibility of his administration being subjected to intense opposition-led investigations and oversight through congressional committees.
This scenario may support the continuation of current economic and trade policies, and reduce some concerns related to legislative deadlock. But it does not mean that financial risks disappear; Analyzes reported by Reuters expect that disagreements over government financing and the debt ceiling will continue in 2027, regardless of the outcome of the elections.
Also, keeping Congress will not guarantee that stocks will rise or bond yields will fall. Markets will continue to evaluate the impact of tariffs on prices, the cost of energy on inflation, the direction of interest rates, as well as corporate earnings and growth expectations.
Investors may react positively if the result is consistent with their expectations and reduces the risks of legislative confrontations, but the size of this effect will depend on whether the markets had priced in the result in advance, and on the economic developments that coincide with it.
Markets are watching beyond 2028
In an analysis published by Reuters, economic writer Mike Dolan believes that the most important impact of the elections may not be in its direct results, but rather in the start of the countdown to the 2028 presidential race, and the accompanying questions about the continuity of current American policies.
Since Trump's victory in the 2024 elections, the US Standard & Poor's 500 and MSCI global stock indexes have risen by slightly more than 30 percent, while the Nasdaq index, which is heavy on technology stocks, has risen by 42 percent, and the shares of the seven giant technology companies have risen by about 45 percent. The Philadelphia Semiconductor Index also more than tripled its level, supported by a boom in investment in artificial intelligence.
In contrast, global crude oil prices rose by 53 percent during the same period, according to the analysis, with the increase recorded since the outbreak of the war with Iran in February. European defense company stock indices rose by more than 60 percent, compared to gains of 27 percent for their American counterparts.
As for the US dollar and Treasury bonds, they recorded a weaker performance during the period, with ten-year US bond yields rising by about a full percentage point since the 2024 elections. This reflects the interplay of inflation factors, monetary policy, customs duties, and energy shocks, in addition to the impact of large investment in artificial intelligence.
The Reuters analysis implicitly warns against reducing these moves to Trump’s policies alone. A significant portion of stock gains was attributed to the artificial intelligence boom, while other movements were linked to trade and foreign policies and economic developments. Hence, the elections may prompt investors to re-evaluate the continuity of these trends, but they will not be the only factor determining their course.
Bond and oil yields further complicate the landscape
The election is taking place at a time when political risks are intertwined with inflation pressures and interest rate expectations. The Standard & Poor's 500 index recorded a level of 7744.52 points during trading on October 28, down by about 1.3 percent from its peak recorded during trading on October 6 at 7844.52 points. The market volatility index (VIX) reached 16.97 points.
In the bond market, ten-year US Treasury bond yields closed at 5.05 percent on October 28, compared to about 3.88 percent at the end of 2022, while two-year bond yields reached 4.67 percent.
In the currency markets, the dollar index recorded 102.15 points during trading on October 29, while the price of the euro reached $1.11495 before the Fed’s decision the previous day.
As for oil, Brent crude for December delivery traded near $114 a barrel on the morning of October 29, after ending the previous session at $115.32. West Texas Intermediate crude also traded above $101 per barrel, after closing at $102.78.
These levels are important because rising energy may increase inflationary pressures and affect interest rate expectations and the cost of borrowing. Also, any geopolitical escalation may raise oil volatility, which will reflect on inflation and growth expectations in the United States and global markets.
The Fed’s decision adds another factor
Days before the elections, the Federal Reserve kept interest rates unchanged at a range between 3.75 and 4 percent, in a vote that ended with a result of ten votes against two opposing votes who preferred to raise interest by a quarter of a percentage point.
After the decision, the markets continued to expect a high probability of raising interest rates in December, as Fed Watch data affiliated with the CME Group showed a probability of approximately 85 percent for a new increase. This means that stabilizing interest rates in October did not dispel investors' fears of continued inflationary pressures.
These developments also mean that the election result will come at a time when the cost of borrowing and the direction of monetary policy are still being watched, which may limit investors’ ability to take decisive positions based on political developments alone.
The surprise may be more important than the result
Among the three scenarios, Democrats regaining the House of Representatives remains the most likely possibility according to prediction market bets, while control of the Senate remains less decisive. But the market's reaction will depend not only on the final result, but also on how different it is from expectations, the size of the majority that the winners will achieve, and whether it will lead to a legislative confrontation or political settlements.
Investors will also continue to monitor oil prices and US economic data, most notably the jobs report scheduled to be released on November 6, in addition to inflation data that may affect interest expectations.
In the longer term, the elections may be the beginning of a phase in which investors re-evaluate US policies over the horizon of 2028, instead of focusing on the direct impact of the result. Whether control of Congress changes or remains in the hands of Republicans, the movement of markets will remain dependent on the interaction of politics with inflation, interest rates, energy, and growth, and the extent of the US administration’s ability to pursue its agenda in a more competitive political environment.
