US Midterm Elections: A Divided Congress May Boost These Stocks
The upcoming 2026 US midterm elections are expected to have a significant impact on the market, with potential changes in congressional power affecting various sectors, including defense, technology, and finance. According to Morgan Stanley, when a Republican president coincides with a divided Congress, major policy adjustments become more difficult, although the defense, technology, and financial services sectors may relatively benefit. A divided Congress could lead to a check-and-balance dynamic between the White House and Congress, reducing the likelihood of large-scale tax hikes, comprehensive cuts to energy policies, or radical changes to the financial regulatory system.
Historical data shows that the US president's party typically loses congressional seats in midterm elections. The 2026 elections are unique in that control of the House of Representatives is already built on a razor-thin majority, meaning a few key districts could shift the balance of power in Congress. If Democrats take the House while Republicans maintain control of the Senate, the likelihood of significant policy changes decreases.
A divided Congress could benefit certain stocks, including Lockheed Martin, Palantir, JPMorgan Chase, ExxonMobil, and Coinbase. Lockheed Martin, a primary supplier for F-35 fighter jets and THAAD missile defense systems, is well-positioned to benefit from continued defense spending. Palantir, a leading provider of artificial intelligence and defense technology, is also likely to benefit from increased government contracts.
JPMorgan Chase, with its diversified business spanning consumer banking, credit cards, asset management, trading, and investment banking, is well-suited to benefit from a stable regulatory environment. ExxonMobil, a leading energy company, may benefit from continued Republican control of Congress, which could lead to looser environmental regulations and expanded US oil and gas extraction. Coinbase, a cryptocurrency exchange, is highly sensitive to regulatory developments and could benefit from a more favorable regulatory environment.
Morgan Stanley statistics show that the S&P 500 Index has gained an average of about 13% in the 12 months following midterm elections. However, these data only illustrate historical patterns and cannot rule out the possibility that economic recession, inflation, and interest rate changes could exert a greater impact on the market.