Inconsistency, inflation, instability: Rejected by voters

The Democratic takeover of Congress will constrain the Trump administration while leaving the near-term US economic outlook largely unchanged.

• Growth during the first half of Trump’s second term averaged 0.2 percentage points below the rate recorded during the Biden era.
• Democrats won both chambers by flipping at least 31 House seats and 7 Senate seats, marking one of the Republicans’ largest electoral setbacks in more than 30 years.
• The outgoing Congress will debate the budget before stopgap funding expires on December 11, 2026, creating risks of a government shutdown or another continuing resolution.
• Budget and debt ceiling negotiations in 2027 and 2028 could remain difficult because 60 Senate votes are required for passage while Democrats are expected to hold 54 seats.
• Democrats may seek to reduce future tax cuts and increase transfers such as Social Security and unemployment benefits, while the rollout of data centers could continue at a slower pace.

Takeaway: The election should have limited immediate macroeconomic impact, while fiscal negotiations and policy constraints may increase political uncertainty and support cyclical assets through expectations of less aggressive trade policy.