US midterms

US Democrats have won control of Congress in a sweeping victory at the midterm elections, taking both the Senate and the House of Representatives in a big setback for President Trump. The results showed voters’ frustration at the cost of living, tariffs and the rise of artificial intelligence (AI). In signs of that discontent, Kansas elected its first Democratic senator since 1932 and Texas its first since 1988.

The results showed voters’ frustration at the cost of living, tariffs and the rise of artificial intelligence (AI). In signs of that discontent, Kansas elected its first Democratic senator since 1932 and Texas its first since 1988.

House, Senate and Governers results projections

The Democrats are projected to win a commanding majority in the House, to take roughly 56 of the 100 seats in the Senate and to flip prominent governorships their way. Markets have been reassured by the composition of the Democrats’ majority, with moderates in the ascendancy – an outcome that points to the party consolidating the centre as it looks ahead to the presidential elections in 2028.

Democratic Caucus indicative composition

Congressional control does not translate into a free hand. Overriding a presidential veto requires 67 Senate votes, well above the projected Democratic total. That leaves scope for selective bipartisan deals, but not for a broad Democratic legislative agenda.

At the same time, gridlock may encourage Trump to rely more heavily on powers that do not require new legislation. Trade and foreign policy are the clearest areas where the executive can still act.

A renewed impeachment push would expose divisions within the Democratic coalition. Even if the House impeached the president for a third time, conviction in the Senate would still require a two-thirds majority that Democrats lack. The result would likely be political headlines rather than a change of president.

Policy implications

Fiscal policy. There is little prospect of major fiscal stimulus or consolidation, since President Trump retains the power to veto legislation. Even so, the risks to the budget skew towards a wider deficit, driven by higher healthcare and defence spending. A California ballot proposal for a one-off 5% tax on billionaires appears unlikely to pass, suggesting a wealth tax is not becoming an immediate national priority.

Debt trajectory. Several deadlines will create repeated opportunities for bargaining. The next government shutdown deadline is 11 December, while the debt ceiling is expected to become binding in mid-to-late 2027. Neither party has an incentive to trigger a lasting fiscal crisis, but both will seek concessions. The result is likely to be episodic volatility around deadlines without a durable improvement in the debt trajectory.

Geopolitics. Democrats may try to force votes on the Iran war and use investigations, funding conditions and oversight to constrain the administration. But the president retains wide latitude in the conduct of foreign affairs. A Democratic Congress could, therefore, raise the political and procedural cost of policy without necessarily changing its direction quickly.

Trade. Trade is the clearest post-election policy risk because the president can act through existing unilateral authorities. For investors, this means that legislative gridlock should not be interpreted as policy stability. Tariff uncertainty may remain a source of volatility for import-sensitive sectors, multinational supply chains and US trading partners.

AI. Nine of the ten states with the largest committed data-centre demand for 2027 are projected to have Democratic governors, some of whom have proposed conditional pauses on their construction pending new rules, and potentially additional taxes. This is likely to cause delays in the US data centre boom, making installed compute more valuable in the face of unabated AI demand.

Top 10 States by data centres planned