The Midterms

The 2026 US midterms are likely to produce a Democratic majority or divided government without materially derailing the US growth and market outlook.

• Trump's approval has fallen to 31%, while Democrats lead Republicans 52% to 43% in generic congressional polling.
• Democrats need a net gain of five House seats for a majority and four Senate seats, including victories in Republican-leaning states.
• A Democratic or divided Congress could intensify the budget confrontation when government funding expires on 11 December, but much of the administration's agenda can continue through executive action.
• Since the post-war period, the S&P 500 has risen in the 12 months after every midterm, gaining about 15% on average versus 9% in a typical 12-month period.
• The weakest post-midterm periods followed shocks unrelated to elections, including the 1987 crash, the 2011 US downgrade and the 2015 China devaluation.

Takeaway: Political gridlock is unlikely to be the main market driver; investors should focus instead on strong economic growth, record corporate profitability, resilient consumption and a nascent manufacturing revival, while recognising that historical performance is not a forecast.