Special Update: What the 2026 Midterm Election Results Mean for Your Investments
Wyatt Lewis | Financial Advisor
November 4, 2026
The 2026 midterm elections have shifted control of Congress, with Democrats winning both the House and Senate. This creates a divided government for the final two years of President Trump's term. Divided government is actually quite common after midterm elections, and has occurred under many recent presidents.
Many observers see this result as a reflection of how voters feel about the economy, including concerns about tariffs and high oil prices tied to the conflict with Iran. But it is worth keeping things in perspective. Presidents and Congress often get too much credit or too much blame for economic conditions. Broader forces like technological change, inflation, and economic growth tend to have a greater impact on financial markets than election outcomes.
Consumer confidence has fallen to near-record lows
Voters' frustration with the economy was a major theme in this election. According to the AP's survey of voters, the economy was the single most important issue, and nearly 90% said the cost of living was a crucial or major factor in their vote.1 Everyday costs like gasoline, which is averaging $4.12 per gallon, a 30-year mortgage rate of around 7.3%, and Consumer Price Index (CPI) inflation of 3.7% in September have all weighed heavily on household budgets.
Interestingly, even as people feel pessimistic, overall consumer spending has held up. The economy grew at a 2.5% annual rate in the third quarter, which is historically strong.3 This gap between how people feel and how they actually spend is sometimes called the "K-shaped" economy, where some households benefit from rising markets while others feel the pinch of higher prices on food, fuel, and housing.
The key takeaway is that how people feel about the economy and how markets actually perform are not always the same thing. This is why it is important not to let sentiment or election results drive investment decisions.
Policy uncertainty has contributed to market swings
Uncertainty around policy, including tariffs, the One Big Beautiful Bill Act, the national debt, and the war in Iran, has contributed to short-term market volatility in recent years. In each case, markets experienced turbulence before settling down as investors refocused on economic fundamentals.
A divided government often means fewer sweeping policy changes, since major legislation requires agreement between parties. This can reduce uncertainty for businesses and markets, though challenges remain around the federal budget and debt ceiling in the months ahead. One closely watched area is the buildout of data centers for artificial intelligence (AI). Voters in at least 41 local areas considered measures on data center construction, with most results favoring new restrictions. Specifically, voters chose to limit data center development in 37 jurisdictions and to allow or support development in one, based in Harwood, North Dakota. One measure in Kansas banned "high-impact data centers," defined as facilities using more than ten megawatts of electricity or 100,000 gallons of water per day, for 10 years.4
The economy has expanded under many different governments
The chart above shows U.S. real GDP (economic output adjusted for inflation) going back to 1947 under many different political combinations. In each case, long-run growth was shaped by the broader business cycle and long-term trends, not by which party was in power.
This is not to say that policies around taxes, international relations, or government programs do not matter at all. But history shows they are rarely the main driver of long-term investment outcomes. As citizens and voters, elections are an important way to make our voices heard. When it comes to managing investments, though, it is wise to keep political views separate from financial decisions.
The bottom line? The midterm election results reflect voters' concerns about the economy and rising prices, but sentiment and political outcomes do not always translate directly to portfolio performance. Investors should continue to stay balanced and focused on long-term trends throughout political cycles.
References
1. https://apnews.com/article/midterms-trump-election-2026-democracy-economy-congress-young-voters-688773185f71690b00847726efbf045a
2. https://www.sca.isr.umich.edu/
3. https://www.bea.gov/data/gdp/gross-domestic-product
4.https://ballotpedia.org/El_Dorado,_Kansas,_Prohibit_Data_Centers_and_Battery_Energy_Storage_Systems_Initiative_(November_2026)
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