Corporate investors assess sector risks ahead of US midterm elections

Corporate America is weighing the impact of the upcoming US midterm elections on various sectors, with analysts noting that a strong Democratic showing could benefit clean-energy, housing and healthcare stocks, while AI, data-center and defense firms might encounter increased regulatory pressure.

Prediction-market odds from Polymarket place the likelihood of a Democratic sweep at 72%, while a Reuters/Ipsos poll shows President Donald Trump’s approval rating at a career low amid concerns over the cost of living and the war with Iran.

If Democrats control both chambers, they could advance bipartisan legislation to accelerate energy and infrastructure approvals, according to UBS, and may use the Congressional Review Act to overturn emissions-related regulations. The same firm expects the Trump administration to continue implementing the 21st Century ROAD to Housing Act, though Democrats might add affordability measures that could face a presidential veto.

A Democratic majority could also increase the use of subpoena powers to compel tech executives to testify on AI-related issues and could see new ballot measures in several states restricting data-center development. Societe Generale, however, believes the AI trade is likely to remain largely unchanged because Democrats are unlikely to secure a veto-proof majority and key agencies remain under Republican control.

In healthcare, Magdalena Ocampo, a market strategist at Principal Asset Management, said a Democratic sweep could boost momentum for measures targeting costs, consumer fees and prescription-drug pricing. Defense stocks, which rose after Trump called for a $1.5 trillion military budget, may face renewed scrutiny if Democrats gain control of the House, as Congress has yet to appropriate funds for large defense contracts.

Financial-sector analysts at Morgan Stanley expect additional oversight under a Democratic outcome to slow regulatory easing but not halt it, while Barclays analysts note that a stronger GOP presence would support regulatory clarity and policy continuity for banks.

Cryptocurrency prices are not expected to move dramatically, but a Democratic-controlled Senate could make it harder to revive the Clarity Act, according to analysts. Reuters has reported that Democrats are preparing investigations into crypto firms linked to Trump and his family, raising potential legal risks for publicly listed companies in the sector.