One question the Liontrust Multi-Asset team has been asked a lot over the last few weeks is what do the US midterm elections mean for investment markets. We provide some facts about the elections along with possible outcomes and implications.
What is the current position?
Donald Trump is President and his Republican Party currently controls both chambers of Congress: the House of Representatives and the Senate.
Congress is broadly comparable to our Parliament. The House is similar to the House of Commons while the Senate is an elected upper chamber with considerably more power than our House of Lords.
Congress makes laws, approves government spending and scrutinises the President. Both chambers matter because most new federal legislation must pass through them.
When are the elections?
The midterm elections take place on Tuesday 3 November 2026, halfway through Trump’s four-year presidential term. All 435 seats in the House are being contested along with 35 for the Senate.
The first results will emerge after polling stations close on Tuesday evening in the US, which means overnight and into Wednesday morning here in the UK. We should have a clearer picture over the course of Wednesday 4 November, although close contests may take longer to resolve.
Importantly, these elections do not decide who becomes President. They decide which party controls Congress for the final two years of Trump’s term.
What does history tell us?
Sitting presidents generally have a difficult time in midterm elections. Since the Second World War, the President’s party has lost seats in the House in all but two midterms, under Bill Clinton in 1998 and George W. Bush in 2002. Trump experienced this himself in 2018 when Republicans lost more than 40 House seats although they made a small gain in the Senate.
What are the likely outcomes?
I am not going to predict the result, but it is useful to look at the current consensus and betting markets. The figures below are indicative market-implied probabilities as at 21 October 2026.
1. Democrats take both the House and Senate – approximately 63%
This is the most likely combined outcome according to Polymarket, a prediction market.
Trump would face the greatest congressional opposition. Democrats could investigate his administration, make it harder to pass legislation and, with control of the Senate, block or delay many presidential appointments.
However, Trump would remain President and retain his executive powers and veto. A Democratic victory would constrain his ability to implement his agenda rather than remove his authority to act.
2. Democrats take the House, Republicans retain the Senate – approximately 29%
This would create a divided Congress.
A Democratic-controlled House could launch investigations, hold hearings and make it much harder for Trump to pass legislation. However, the Republican-controlled Senate would continue to provide support for many of his appointments and legislative priorities.
Trump would retain considerable freedom to act through existing executive powers.
3. Republicans retain both chambers – approximately 9%
Trump would retain a more supportive Congress, making it easier to pursue his legislative agenda and confirm appointments.
There would be fewer congressional obstacles to his administration, although his actions would remain subject to the law, the courts and other constitutional constraints.
4. Republicans take the House, Democrats take the Senate – less than 1%
This is the least likely outcome according to the current combined-outcome betting market.
Trump would face opposition in the Senate on appointments and legislation, but a Republican-controlled House would limit Democratic investigations and legislative initiatives. The result would be a divided and potentially gridlocked Congress.
What does this mean for trump’s executive powers?
This is perhaps the most important distinction.
An executive order allows a President to direct the federal government within the limits of his existing legal authority. A change in Congress does not automatically cancel those orders.
Congress can pass laws to restrict presidential powers or limit funding for particular policies. However, the President can veto legislation, and overriding that veto requires a two-thirds majority in both chambers. The courts can also block executive actions that exceed the law.
What about foreign policy?
This is of particular importance to investors.
The President has broad discretion over foreign policy although this power is constrained by a constitutional system of shared authority and checks and balances with Congress. Commentators are divided in their views of whether an electoral setback in the midterms would lead to Trump trying to pursue a more adventurist foreign policy over the last two years of his Presidency.
What is the possible impact on markets?
Again, we will not be making any predictions. For investors, the important question is how the election changes the balance between the White House and Congress, and what that means for policy uncertainty, trade, taxation, government spending and financial markets.
Some argue that deadlock between the President and Congress is actually a positive for investors. If you look at history, in the vast majority of years when there have been midterm elections, the S&P 500 has delivered positive returns in the fourth quarter.
Having said all of this, we add our usual risk warning about paying too much attention to the midterm elections: concentrating on the latest political announcements and events can be the enemy of sensible long-term investment planning. Political developments can dominate the headlines and move markets in the short term, but investors should distinguish between noise and events that genuinely change the long-term outlook for inflation, economic growth and corporate earnings.
Capital at risk. Issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.
Disclaimer
This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business..
It should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets.
This information and analysis is believed to be accurate at the time of publication but is subject to change without notice. Whilst care has been taken in compiling the content, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or directly from Liontrust. If you are not a professional investor, please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 10.2026
