US midterms results: What’s next for markets?

Democratic control of Congress under a Republican administration should have limited macroeconomic effects, while the main market consequences will vary across equities, AI infrastructure, credit and Federal Reserve policy.

• The S&P 500 gained an average of 13.7% one year after midterm elections, while divided-government outcomes produced an average 15% gain versus 11.5% under single-party control.
• Democratic victories in states important to AI infrastructure, alongside local restrictions on data centers, are expected to make new projects in Texas, Georgia, New Mexico and Nevada slower and more expensive.
• Existing or fully permitted data centers and power infrastructure should gain relative value, while behind-the-meter energy providers may face near-term pressure as development shifts toward international facilities.
• Since 2000, high-yield credit delivered an average three-month post-election total return of 2.9%, and high-grade spreads tightened by 7 basis points; spreads tightened in November and December in 8 of the last 10 years.
• Chief U.S. economist Michael Feroli expects one further Fed hike in December, while Democratic control of the Senate will influence the replacement of the governor whose term ends in January 2028.

Takeaway: Investors should focus on earnings, growth, inflation, deficits and the Fed for credit and macro positioning, while treating permitting risk as a specific headwind for new U.S. AI infrastructure.