View from the US: A Blue Wave is taking form

Erin Caddell of GK Strategy’s American partner Anchor Advisors examines the shifting US midterm landscape and the implications of a potential Democratic resurgence.

Like a surfer looking out at the ocean for the next big swell, US political observers are seeing signs of a gathering political “Blue Wave” – a potential shift in control of the House of Representatives and/or the Senate to Democrats in the midterm elections on 3 November. At this point, it is difficult to tell whether the wave will be big or small, and in the rapidly shifting seas of American politics, it could dissipate before it hits the shore. But US-focused investors and corporates should start paddling now to position themselves for the policy changes likely to occur.

As with most US political analysis these days, the midterm election outlook begins and ends with one man: President Trump. Arriving at the halfway point of the president’s term, midterms are often viewed as referenda on the incumbent administration’s progress. And with Trump dominating his party and the political debate as few have, midterm campaigns have been more focused on Trump than on the individual House and Senate candidates.

Here, the news is not good for Trump and the GOP. Continuing a trend we’ve noted in this column in recent months, Trump’s approval rating continues to grind lower due to high fuel prices driven by the unpopular US war with Iran, sticky inflation, and more recently, by a reacceleration of a trade war with Canada. An FT poll released on 6 September is indicative of the trend of recent US voter surveys: The poll of 1,914 registered voters found that 33% approved of Trump’s performance at the end of August, down from 39% in May. Equally troubling for the GOP, the survey found that independent voters’ approval of the president dropped from 32% in May to 26% in August.

Trump’s sagging popularity is being felt on the campaign trail. In the House, Republicans hold a slim majority of 218-214, meaning Democrats need to flip three seats to seize control. 270towin, an election forecaster, pegs 215 House seats as leaning Democratic, and 201 Republican equivalents, with 19 toss-ups in the 435-member body.  Since 1946, the incumbent party has lost an average of 25 House seats in the midterms. Betting markets ascribe a 90% likelihood of a House flip in November.

In the fight for the Senate, with Republicans holding a 53-47 edge, Democrats need to win a net four seats to gain control (the Vice President breaks ties). The Democrat candidate is leading in the latest polls for GOP-held seats in Alaska, Maine, Iowa, North Carolina, Ohio and Texas, according to RealClearPolitics, though the margins are within a point or two in several, and a couple of Democrat-controlled Senate seats are also close. Betting markets peg odds of a Democratic Senate flip at 62-3%, up from 30% a year ago.

A lot can change in two months. But the data begs the question: What would it mean for US-focused investors and corporates for Democrats to win one or both houses of Congress in November? We focus here on two sectors: healthcare and renewable energy:

Healthcare. The healthcare and health insurance sectors have faced stiff headwinds throughout the second Trump Administration. The One Big Beautiful Bill (OBBB) – the centerpiece of the Republican legislative agenda in the first half of Trump’s second term – approved US$911 billion in spending cuts in the Medicaid health-insurance program for the poor over 10 years (some 15% of projected spending before the bill’s passage) and tightened eligibility requirements. Trump’s health secretary, Robert F. Kennedy Jr., has also pursued an anti-vaccine agenda that has hurt large pharmaceutical companies as well as primary-care physicians who administer vaccines to young children.

Democrats would not gain the ability to overturn administrative decisions even if the party wins the House or Senate in November. But through the appropriations process, a Democrat-led congressional chamber would dig out an old DC playbook: delay and live to fight another day. Democrats would attempt to delay the mandated spending cuts and tougher eligibility requirements for Medicaid recipients, many of which are not scheduled to come into effect until 2027. Democrats would also push back through budget tactics and oversight hearings against RFK Jr.’s moves to water down vaccine mandates and appoint anti-vaccine members of government health advisory panels. Beneficiaries could include hospitals (which receive substantial revenue from serving Medicaid recipients), Medicaid-focused insurers, primary-care physicians’ practices and drug manufacturers.

Renewable Energy. It is a worthwhile debate whether healthcare or renewable energy has been a bigger punching bag for Trump 2.0. We’ll give the nod to renewables, as not even health providers have been paid by the government not to provide their service. The Trump Administration has taken this unusual step, offering to pay more than US$2 billion to offshore wind developers sponsors to stop and invest in fossil-fuels projects instead. The Administration reported it approved new oil and gas leases on federal lands at a pace 55% greater in 2025 than in the last year of the Biden Administration in 2024. Yet the advantages of renewable development over fossil fuels – notably lower costs and faster speed to market – have meant that renewable production has still been growing despite the Trump Administration’s stance. The U.S. Energy Information Administration (EIA) reported that total U.S. energy production grew 3.4% y/y in 2025, with natural gas production increased by 4%. Renewable energy production rose 3%, equal to the growth in crude oil output, with both solar and wind setting new records (see below). Despite Trump’s constant anti-renewable, pro-fossil-fuels rhetoric, 61% of Republicans told Pew Research Center in 2025 they support more solar power (77% for all respondents), while 48% favor more wind (68% overall).

This bipartisan base of support could lead to improved market conditions for renewables firms under a Democrat House and/or Senate. As part of broader negotiations over the federal budget or on raising the debt limit, Democrats could push to restore tax credits for renewables projects passed during the Biden Administration in the Inflation Reduction Act (IRA) that the Trump Administration and the GOP-controlled Congress have reversed or limited thus far in Trump’s second term. Democrats would also use their investigative powers in Congress to scrutinise the payments the Trump Administration has made to halt offshore wind developments. Ultimately, market demand may lead policy: The new data centers necessary to power the AI boom are expected to increase total U.S. electricity demand by 5-10% by 2028, according to estimates by the University of California’s Lawrence Laboratory. As loyal Westminster Unwrapped readers know, the data-center boom has been met by a sudden public backlash across the U.S. (see our August 2026 note “Can’t buy me love: American public opinion turns against data centers – what’s next?”). But even if actual data-center construction is half that of projected, the U.S. will need significantly more renewables capacity to meet demand even if oil and gas development proceeds apace.

If Republicans rebound and hold both houses of Congress in November, the healthcare and renewables sectors would face a challenging policy landscape, but one no more hostile than the one they have managed through since January 2025. But a small blue wave could materially improve the operating environment for sectors out of favor thus far in Trump’s second White House stint, even better if a big one crashes to shore.