After the 2026 midterms: How will the ‘blue wave’ affect markets?

The Democratic takeover of Congress should constrain parts of Donald Trump’s agenda while leaving fiscal pressure, political volatility and long-term support for U.S. assets largely intact.

• Democrats are expected to pursue healthcare legislation, prescription-drug cost reductions, Medicaid changes and possible credit-card fee caps, while tariffs on food and housing materials could be repealed.
• Political power has shifted in 10 of the last 11 elections, leading Matt Miller to reject the assumption that Democrats will win a 2028 trifecta; investigations and negotiations over Iran and defense spending are likely in the short term.
• Renewed Medicare for All debate could pressure insurers, pharmaceutical companies and hospitals, although UnitedHealthcare’s Medicare Advantage fundamentals should remain stable and Eli Lilly benefits from its GLP-1 franchise and Alzheimer’s drug research.
• The U.S. government recorded a roughly $2 trillion fiscal deficit in fiscal year 2026, with deficits of a similar size expected for several years; Tom Hollenberg sees 10-year Treasury yields near 5% as compensation for continuing fiscal risks.
• Labor markets, corporate profits, business investment and consumer spending remain resilient, while enterprise AI adoption could continue for up to 20 years despite possible restrictions on data-center construction and local opposition.

Takeaway: Investors should expect policy-driven volatility and persistent deficits, while the authors remain constructive on U.S. economic resilience, AI investment and selected healthcare stocks, with longer-dated Treasuries supported by yields near 5%.