JPMorgan Breaks Down the U.S. Midterm Elections: 66% Probability of a Democratic Sweep; Republicans Holding

JPMorgan has released a scenario analysis of the four possible congressional outcomes from the 2026 US midterm elections, with voting underway November 3, assigning a 66% probability to a Democratic sweep of both the House and Senate, 26% to a split Congress with Democrats holding the House and Republicans the Senate, 7% to Republicans retaining both chambers, and 1% to a reverse split with Republicans in the House and Democrats in the Senate. Notably, the least likely outcome—a Republican hold—is projected to be the most market-friendly, with the S&P 500 estimated to gain 1% to 1.25%, versus a range of -0.25% to +0.50% under a Democratic sweep, +0.5% to 1% under a Democratic House/Republican Senate, and +0.25% to 0.75% under a reverse split. A Democratic sweep could pressure AI and tech stocks on expectations of tighter regulation of data center construction and tech expansion, though JPMorgan notes such legislation would likely fail to override a presidential veto and advises buying tech dips. Fiscal dynamics also diverge: reduced deficit spending under Democratic control could push long-term Treasury yields lower, while continued Republican control could lift yields through higher deficits, alongside potential escalation of US military action against Iran affecting energy prices. Congressional investigation risks for executives tied to Trump's political donations persist across scenarios with Democratic presence in either chamber. Markets now await the election outcome primarily as a catalyst to resolve policy uncertainty, with historical patterns from CNBC showing US equities typically post positive returns after elections.