The upcoming midterm election could significantly impact major U.S. companies, particularly those in defense, healthcare, crypto, and AI. A Democratic victory in either or both chambers of Congress would grant the party new leverage to investigate companies, challenge federal spending, and demand legislative concessions. However, President Donald Trump would retain his veto power and broad authority over key policies.
Historically, stocks have performed well under divided government, with the S&P 500 gaining an average of 23% under Republican presidents with a split Congress, compared to 16% when Democrats controlled both chambers. Analysts attribute this to congressional gridlock limiting sweeping policy changes. However, some caution against assuming this pattern will repeat.
For investors, the midterm election could reshape which businesses preserve their advantages in Washington. Congressional oversight and investigations could demand documents, compel testimony, and haul executives before public hearings. Companies like Lockheed Martin, Molina Healthcare, Coinbase, and others are already experiencing preliminary probes.
Federal spending decisions could also shift, with Democrats potentially pushing back on Medicaid cuts and challenging defense spending related to Iran and Israel. Meanwhile, crypto companies like Coinbase are waiting on Congress to finalize rules for cryptocurrency, with Democratic gains potentially leading to stricter regulations.