As the U.S. midterm elections approach on Tuesday 3 November, plenty of election forecasters are making their predictions of which candidates in the House and Senate will win or lose. But what will be the public-policy implications of the midterms for U.S.-focused investors and corporates? Erin Caddell of GK Strategy’s American partner Anchor Advisors looks below briefly at three scenarios: Democrats win both the House and Senate; Democrats win the House, but not the Senate; and Republicans hold both chambers. 

Scenario #1: Both House and Senate flip. This is the most likely outcome based on most non-partisan election prognosticators, as well as betting markets: as of 2 November, Polymarket and Kalshi ascribe a 94-95% likelihood to a shift in power in the House, and a 73-74%+ chance of the same in the Senate. Should both houses flip, domestic policy would change substantially in the next Congress. With control of both houses of Congress, Democrats would gain key blocking votes over the budget. Firstly, while Democrats will almost certainly not gain a veto-proof majority, the party will use its leverage to agree to top Republican priorities (think defense) only if the GOP makes concessions on Democratic demands. For clues as to where these asks could fall, look to where Republican candidates in tough re-election races are breaking with Trump: tariffs, immigration enforcement, and healthcare (a key contributor to rising costs for families) all come to mind.  

Secondly, Republican candidates for president in 2028 would immediately pivot to distance themselves from Trump if the blue wave indeed leads to a Democratic-controlled House and Senate. Winning Republican candidates returning to Washington will be more likely to disavow the most controversial elements of the Trump 2.0 agenda. Thirdly, the turnover in Administration staff that often occurs after midterm elections will accelerate if the House and/or Senate flip. White House staffers and other Administration officials will not want to be dragged before congressional committees month after month, which is the agenda Democrats have already telegraphed they will employ should they win one or both chambers.  

Finally, if both houses of Congress flip, federal agencies will face much more scrutiny from a hostile Congress in the final two years of Trump’s presidency. Trump Administration officials will be asked to testify regularly before Democrat-led House and/or Senate committees. While one might think the Trump Administration would welcome such confrontations, these hearings, and the process of responding to the numerous data requests that accompany them, occupies agency time and resources that would otherwise be spend on additional regulatory actions. We have seen this occur with both Democratic and Republican lame-duck presidencies in the past where agencies largely move to defend in court and on the Hill the rules they promulgated in the first two years of the Administration, rather than attempting to finalize new ones in a more hostile political environment.  

Scenario #2: Democrats win House but not Senate. Should Republicans hold the Senate – and note that even a 50-50 split would be enough as the VP breaks ties – Trump and the GOP can say their agenda remains popular with the electorate despite near-term headwinds (gas prices, inflation etc.), and that retaining the House is nearly impossible for the president’s party in midterms. MAGA would remain a force into 2028, with Vice President J.D. Vance and Secretary of State Marco Rubio the most likely standard-bearers for the party as it enters the post-Trump era. 

Even without Senate control, Democrats would gain substantial oversight/subpoena powers should they win the House. Democrats are already planning an active agenda for investigations of Trump, his family and Administration allies in 2027. The question is how far will they want to push before upsetting Trump voters who crossed over to vote Democrat in 2026? Democrats and Republicans in Congress alike will be under pressure from voters to act on “affordability”, the buzzword in the 2024 and now 2026 elections. House Democrat working groups that were established to create action plans for the next Congress should the party win a majority give an indication of the party’s priorities. Energy permitting reform, the Farm Bill, AI regulation, healthcare and the “care economy” (childcare, early-childhood education, etc.) are all are potential areas for bipartisan agreement – and where Trump might be able to be brought along to support a deal struck in Congress, however reluctantly. 

House Democrats’ “Cost of Living” Planning Groups 

Scenario #3: Republicans hold both House and Senate. If Trump and the GOP defy the polls and hold both the House and Senate, it would be read as a validation of the Trump Administration’s policies in his second term – that a corporate-first approach, bolstered by aggressive immigration enforcement and protectionist trade policy is supported by the electorate even in the face of near-term economic headwinds. Republican candidates would embrace MAGA policies in their 2028 campaigns, led by VP Vance and Secretary of State Rubio, the two most visible standard-bearers of the post-Trump MAGA movement. Defense firms would be a clear winner of a GOP congressional hold in 2026, as Republicans would push through a large increase in defense spending to finance the Iran war as well as overall military readiness. Similarly, Big Tech and large AI data-center developers and infrastructure providers would receive a boost, as a GOP win would be viewed as supportive of Trump 2.0’s no-holds-barred AI strategy.