Democratic sweep in midterms would shake up Wall Street’s pecking order
A Democratic takeover of both chambers of Congress on 3 November would likely trigger a violent reshuffle inside US stock markets, hitting AI giants and banks while handing fresh momentum to healthcare, warns the chief executive of one of the world’s largest independent financial advisory and fintech organisations.
Nigel Green, CEO of deVere Group, says the debate over whether a blue wave sinks or lifts the S&P 500 overlooks where the damage and the gains are likely to land.
Prediction markets now put the odds of Democrats winning both the House and the Senate at close to two in three. A Republican sweep sits at barely one in 10.
“Wall Street’s had months to get used to the idea of a Democratic Congress, so I’d be surprised to see a crash on election night,” says Nigel Green.
“The bigger shift is likely to happen beneath the surface, in which sectors lead and which get left behind. Money’s already moving, and a sweep would speed it up.”
In recent days healthcare has been the strongest performer of the S&P 500’s 11 sectors, while technology has been the weakest.
Democrats have turned the power-hungry data centre into a political target, with plans to make operators carry more of the electricity costs their facilities create.
“The AI trade has been priced as if nothing in Washington could touch it,” notes the deVere CEO.
“A Democratic Congress changes the picture. Once data centres become an argument about household energy bills, the spending plans of the biggest tech companies face questions they’ve never had to answer before.
“I believe chipmakers and the wider buildout chain would feel it first.”
Healthcare stands on the other side of the ledger. Federal Obamacare tax credits expired at the end of last year and remain stalled in the Senate.
“Restoring those subsidies would put more paying patients through hospital doors and onto insurers’ books,” he says.
“There’ll be tougher hearings on drug pricing middlemen and Medicare billing, of course. Even so, the direction of travel for the sector would turn far more supportive.”
Nigel Green believes banks, particularly regional lenders and those leaning on dealmaking, would face a tougher regulatory climate under a Democratic Congress.
Oil and gas producers would likely contend with slower federal leasing and tighter emissions rules, while grid infrastructure and alternative energy stand to gain.
“Defence is the one area I’d expect to hold firm whoever wins,” he adds. “With the security backdrop as tense as it is, I can’t see any Congress slashing military budgets.”
On currencies, the deVere CEO predicts a muted response from the dollar if the polls prove right, because a sweep is already largely priced in.
“Currency traders have done their homework on this one,” he opines.
“If Democrats take both chambers, I’d expect the dollar to shrug. A Republican sweep would be a very different night, with a likely dollar rally and a bond market in revolt.”
The 10-year Treasury yield sits above 5%, its highest level since 2002, after the Federal Reserve raised rates in September for the first time since 2023.
A Democratic Congress would restrain the White House’s spending ambitions and could block its picks for the Fed, both of which would offer bonds some support.
“Bond investors hoping a Democratic Congress sends yields tumbling are likely to be disappointed,” says Nigel Green.
“Inflation is running hot, energy costs are elevated, and companies are borrowing heavily to fund AI. Those forces don’t care who chairs the committees.”
Any Democratic majority would also run into the president’s veto, with no realistic prospect of the two thirds Senate majority needed to override it. A government funding deadline on 11 December and a debt ceiling battle expected in 2027 lie ahead.
“Washington’s about to get a lot noisier,” concludes Nigel Green.
“Gridlock usually suits markets because nobody in Washington can spring a surprise.
“This time it comes with Treasury yields above 5%, so every funding fight or debt ceiling scare risks pushing borrowing costs higher for the government, homeowners and businesses alike.”