Democratic Midterm Gains Rattle Markets

Asian equities and the US dollar weakened on Wednesday as investors reacted to US midterm election results that gave Democrats control of the Senate and put them on course to win the House of Representatives. The results represented a setback for President Donald Trump and Republicans, who had held both chambers during the first two years of Trump’s second term. Cost-of-living concerns, including high fuel prices, and opposition to data-centre development contributed to Democratic gains. Investors are weighing whether the outcome could bring tighter regulation of artificial intelligence, as well as changes to policy on government finances, defence, healthcare, banking and cryptocurrency. The prospect of divided government raised concerns about legislative gridlock. Trump said he would veto Democratic legislation, though he also suggested deals might eventually be possible. Analysts warned that disputes over spending and the debt ceiling, investigations and limited legislative progress could follow. They noted that the president would retain substantial executive powers, making the consequences for individual industries uncertain; markets may already have anticipated a narrow Democratic victory, while a decisive one could prompt investors to reassess Trump’s remaining agenda and the political outlook toward 2028. The uncertainty weighed on markets. European index futures fell, the dollar declined against major currencies, and the yen strengthened, contributing to losses among Japanese exporters. Tokyo’s Nikkei 225 fell 2.85%, with declines also reported in Shanghai, Sydney, Seoul, Singapore and Taipei, while Hong Kong edged higher. Technology shares faced additional pressure amid concerns about AI regulation and whether the billions invested in the sector will generate returns. US markets had been mixed on Tuesday: the S&P 500 and Nasdaq rose, while the Dow fell. Oil prices also declined, with Brent below $104 a barrel and US crude near $96. Gold rose nearly 0.5%.

CNBC’s Morning Squawk reports that U.S. stock futures rose overnight after Democrats won control of both chambers of Congress in the midterm elections, which the article describes as a rebuke to President Donald Trump and his economic record. The Dow, S&P 500 and Nasdaq futures recovered from session lows. At the same time, the dollar fell to a one-month low, Treasury yields dipped and gold rose as investors sought safer assets. Trump said he would work with Democrats and was willing to accept the results. Market observers said investors often favor political gridlock, while an economist cautioned that Democrats would not have a veto-proof majority and their ability to address affordability remained uncertain. Tesla and SpaceX fell sharply in premarket trading. The article links pressure on Musk-related companies to Democrats’ reported victories in Texas, including James Talarico’s Senate win over Ken Paxton and Gina Hinojosa’s gubernatorial victory over Greg Abbott. The results were portrayed as a setback for Musk after his spending to support Republicans failed. Other large technology stocks, including Amazon, Alphabet and Nvidia, recovered from earlier declines, although investors remained concerned that state restrictions on data centers could slow construction. One view presented was that constraints might curb excessive expansion and capacity. AMD gained after reporting third-quarter results above forecasts, with data-center revenue nearly doubling; CEO Lisa Su was scheduled to appear on CNBC. The article also notes Iran’s reaction to the election. Parliament Speaker Mohammad Bagher Ghalibaf said Americans had voted “NO TO WAR.” Trump attributed some Republican losses to the Iran conflict and gasoline prices, while saying he had no immediate plans to strike Iran. Experts expected Democratic control to bring stronger congressional scrutiny of the administration’s policies toward Iran and Ukraine. The closing election recap says voters’ frustration with prices, corruption, the country’s direction and AI data-center development contributed to Democrats’ decisive gains, giving them a powerful check on Trump during the final two years of his term.

Gold, silver, platinum and palladium rose on Wednesday morning as the U.S. dollar weakened after midterm election projections indicated major Democratic victories, including projected control of the House. By 7:56 a.m. ET, spot gold had gained 2.83% to $4,039.59 an ounce and spot silver had climbed 4.32% to $51.9235. Gold and silver futures also advanced, while platinum rose 3.43% and palladium 6.21%. U.S. stock futures and Treasury yields moved lower, and the dollar index fell about 0.3%; oil prices were slightly higher. The article links the metals’ move to expectations that Democratic control of Congress could weigh on interest rates and the dollar, potentially supporting gold. StoneX analyst Rhona O’Connell said such a political outcome could bring fiscal brinkmanship and institutional friction, adding uncertainty to markets. She noted that reduced fiscal stimulus could mean lower long-term yields and a softer dollar, while debt-limit concerns and a Federal Reserve inclined toward another rate hike could offset those effects. The rally comes after a difficult period for precious metals. Gold and silver surged 66% and 135%, respectively, in 2025 as investors sought safe-haven assets amid geopolitical uncertainty and market volatility. In the current year, however, rising inflation, higher bond yields and hawkish central banks have undermined that momentum: gold is down more than 7% year to date and silver nearly 28%. Gold’s recent advance, including a rise Monday as oil prices retreated, put it on course for a weekly gain of about 3.7%. Capital.com analyst Daniela Hathorn cautioned that the recovery remains fragile. She said geopolitical uncertainty does not necessarily generate safe-haven demand when investors are also worried about restrictive monetary policy. Precious metals may also be sold during sharp equity declines as investors raise cash by liquidating profitable or readily tradable holdings.

The article examines how a Democratic sweep of Congress in the 2026 midterm elections could affect U.S. stocks. Investors were not strongly positioned for Democrats to win both chambers, and some analysts expect an immediate market dip if that outcome is confirmed. JPMorgan estimated a possible decline of about 0.5% for the S&P 500, while a Republican hold on the Senate could instead produce a modest rally. Historically, stocks have tended to rise in the year after midterms, but the article cautions that this pattern may not hold: the S&P 500 has already gained double digits in 2026, and it has not experienced the typical midterm-year drawdown. One technical analyst therefore sees a post-election decline as more likely than the consensus rally. The article also describes possible sector effects. Democrats’ increased influence could raise concerns about restrictions on data centers and AI infrastructure, potentially adding pressure to technology-related stocks already weakened by turbulence in the AI trade. A Democratic win in Texas, where Republican Gov. Greg Abbott is running, could intensify those concerns. Defense stocks might face pressure if spending growth is constrained, while healthcare stocks could benefit from Democratic efforts to restore Affordable Care Act subsidies or reverse Medicaid changes. Financial stocks could also be vulnerable if lawmakers pursue credit-card interest-rate caps as part of an affordability agenda. Finally, the article identifies a potential resumption of conflict with Iran as a separate market risk. Renewed strikes could unsettle markets and lift energy stocks. Overall, it presents the election’s market effects as uncertain, distinguishing possible short-term reactions from longer-term historical patterns and highlighting policy and geopolitical risks.

U.S. Treasury yields declined Wednesday as investors reacted to Democrats’ strong performance in the midterm elections. The benchmark 10-year Treasury note yield fell by more than one basis point to 4.933%. The 30-year bond yield edged down one basis point to 5.314%, while the two-year note yield slipped marginally to 4.612%. The article notes that a basis point is 0.01 percentage point and that Treasury yields and prices move in opposite directions. Democrats won majorities in both the House and Senate. They flipped Republican-held Senate seats in Iowa, Kansas, North Carolina, Ohio, South Carolina, Maine, and Texas, and also won significant gubernatorial contests in Ohio and Texas. The results could limit the Trump administration’s ability to advance legislation through Congress and potentially constrain government spending. The article connects that prospect to a concern investors are monitoring after the election: reduced deficit spending. JPMorgan traders said Democrats could exercise greater influence over the federal budget, potentially leading to negotiations that include the possibility of a government shutdown. The article presents the fall in yields alongside these political and fiscal considerations, but does not claim that election results were the sole cause of the move. It reports the market changes and offers reduced deficit spending as one issue shaping investors’ assessment of the post-election outlook.

U.S. and Canadian stock markets rose in early trading Wednesday after Democrats made major gains in the U.S. midterm elections, taking control of the House from Republicans. The S&P 500 gained 1.1 per cent, the Dow rose 983 points and the Nasdaq climbed 1.7 per cent. Toronto’s S&P/TSX Composite Index was up more than 500 points, or about 1.4 per cent, shortly after the opening bell. Treasury yields declined, and the Canadian dollar strengthened slightly against the U.S. dollar. Investors assessed how the election results could affect industries including artificial intelligence, defence, wind energy and oil. A divided government is often viewed favourably by markets because it may reduce the likelihood of sweeping policy changes. However, Stephen Brown of Capital Economics noted that Democrats’ gains may have limited immediate policy effects: they lack a filibuster-proof Senate majority, and President Donald Trump can veto legislation. Market reactions varied across sectors and regions. First Solar shares rose, while companies associated with Trump ally Elon Musk and the parent company of Trump’s social media business fell. Defence stocks retreated amid speculation that the war in Iran could ease. Some Asian markets also declined as investors considered whether Democrats might slow AI development over safety and data-centre concerns, alongside worries about a possible bubble in AI stocks. Analysts cautioned that the outlook remains uncertain because Trump retains executive authority in areas such as defence, foreign policy and some trade matters. ING Bank’s Carsten Brzeski outlined both the risk of renewed tariff and NATO-spending tensions and the possibility that Trump could pursue a less disruptive course. European markets advanced in early trading, while Japan’s Nikkei and Taiwan’s Taiex fell and South Korea’s Kospi gained. Oil prices declined, the U.S. dollar weakened against the yen, and the euro rose.