Automatic translation: Originally published in Finnish 03/11/2026, 05:57 GMT. Give feedback here.

Based on polls, the US midterms look set to result in a divided government. Historically, this combination has been relatively favorable for the stock market, but this year interest rates, oil, and AI expectations will likely weigh more heavily on the scales than the election outcome.

Tuesday will see votes for all 435 seats in the House of Representatives and one-third of the 100-member Senate. The Republican majority in the House was slim, and Democrats held a narrow lead in party preference polls in September. A net gain of three seats is enough for the Democrats, making a shift in power in the House quite possible. The Senate race is tighter, as the Democrats would need to increase their seat count from 47 to at least 51. 

Consumer's wallet decides the election

The American consumer's mood is sour, even though economic figures superficially look fine. GDP grew by 3.4% in the third quarter, and the unemployment rate has remained at a maximum of 4.5% for five years, which, according to Reuters, is a record-long period. The University of Michigan consumer sentiment is near its lows, but the Conference Board confidence index picked up in October. The reason for the general gloominess lies in price trends. Consumer prices and hourly earnings have both risen by ~5.5% since January 2025, so purchasing power has treaded water. Inflation accelerated to 3.7% in September, and mortgage rates exceeding 7% have put homeownership out of reach for many. Consumption is mainly being kept afloat by high earners, whose stock portfolios have simultaneously ballooned and wealth has grown. According to Treasury Secretary Scott Bessent, polls may be gloomy, but consumer behavior remains robust. It indeed seems that personal sentiment in the consumer's wallet defines the election mood, while general confidence in the economy drives the market.

US: Inflation and nominal wages

Source: Reuters

A divided Congress slows down major tax and spending changes, which has at least historically pleased investors. According to Morgan Stanley, during a Republican president's term, the S&P 500 has risen by an average of ~23% in the year following the election when Congress is divided. According to Bank of America, the index has risen in every 12-month period following an election since World War II, by an average of ~14%. However, an article by Deutsche Bank points out that the market has often been weighed down more by uncertainty than by the election outcome itself.

However, you shouldn't rely too much on history. The S&P 500 has already risen by almost 11% since the start of the year, so there is less upside than usual at the time of the election. In addition, tariffs and foreign policy remain largely on the president's desk, and the Fed raised its policy rate in September for the first time in three years. Waning AI expectations could curb investments in the sector at a time when oil and tariffs are accelerating inflation.

The election may bring short-term volatility, but concrete impacts will likely remain small. The direction for the rest of the year will be determined by the 10-year yield, which has risen to nearly 5%, oil prices hovering near six-month highs, and the returns on AI investments, while a potential change of power in Washington will play a secondary role alongside them.