US voters head to the polls on Tuesday 3 November for the midterm elections. If you invest in global or US funds, you may be wondering whether the result could affect your portfolio. We think the most likely outcome is a divided Congress, where different parties control the House of Representatives and the Senate. This would make it harder for the US government to pass major new laws. In our view, the election alone is not a reason for long-term investors to change course.
What are the midterm elections?
The midterms take place halfway through a president’s four-year term. Americans elect every member of the House of Representatives and around a third of the Senate. Together, the House and the Senate make up Congress, the part of the US government that passes laws. President Trump is not on the ballot, but the result will decide which party controls Congress. This affects how easily the White House can pass new laws, agree budgets and make key appointments. The Republicans currently control both chambers. The US makes up the largest share of global stock markets and is held in many portfolios through global and US funds, so the result also matters to UK investors.
What do the polls suggest?
The House: History is against the President’s party. It has lost House seats in 20 of the last 23 midterm elections, with an average loss of 27 seats. The Republicans begin with only a narrow majority. President Trump’s approval ratings have fallen as the Middle East conflict has pushed up fuel prices and borrowing costs. Concerns about healthcare and immigration enforcement have also weighed on his ratings. Polls and prediction markets suggest the Democrats are likely to take control of the House.
The Senate: The race for the Senate is much closer. Most of the 35 seats being contested are considered safe for the party that already holds them, so the result is likely to depend on a small number of competitive states. The Democrats need to keep four of their own seats and win four from the Republicans, which will be difficult. Trade tensions with Canada, the top trading partner for 26 US states, and diesel at $6 a gallon during the harvest could help the Democrats in some key states.
The three possible outcomes
| Outcome | Likelihood | What it could mean |
| Democrats win the House, Republicans keep the Senate | Most likely |
It would become much harder to pass new domestic laws. The administration would face more scrutiny, and there could be stand-offs over government funding and the US debt ceiling, which is expected to be reached around mid-2027. Pressure from bond markets should limit any large increase in spending.
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| Democrats win both chambers | Possible |
The Democrats would still be short of the two-thirds majority needed to overturn a presidential veto, so major new laws would remain unlikely. However, the Senate approves key appointments, including to the US Federal Reserve. Democratic control of the Senate would therefore provide a check on these appointments and help protect the Fed's independence.
|
| Republicans keep both chambers | Least likely |
Some campaign promises could still struggle to gain support from more cautious Republican lawmakers. These include proposed payments of $5,000 to every adult, with an estimated cost of $1.2 trillion to $1.35 trillion.
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What could a divided Congress mean for investors?
In the two most likely outcomes, the Democrats would not have enough votes to overturn a presidential veto. The White House would also find it much harder to pass its domestic plans. With less room to act through Congress, the administration may rely more on executive orders, which allow the President to act without passing a new law, and focus on trade and foreign policy. This could mean continued uncertainty, including around tariffs.
Markets are used to political uncertainty. Elections and policy changes can move prices in the short term, but they rarely determine long-term investment outcomes. A divided Congress can reduce the chance of sudden, large policy changes. Recent years have also shown that when politics becomes more unsettled, governments around the world are more likely to support their economies through public spending.
We will be watching four areas closely:
1. The US debt ceiling. This is the legal limit on how much the US government can borrow. A budget stand-off in 2027 could lead to government shutdowns and some market volatility.
2. Federal Reserve appointments. The Federal Reserve, or Fed, is the US central bank. Pressure on its independence could matter more to markets than the election result itself.
3. Trade and tariffs. We will continue to monitor the ongoing dispute between the US and Canada, including tariffs, which are taxes on imported goods.
4. The pound and the dollar. For UK investors, changes in the exchange rate between the pound and the dollar can affect returns from US investments. Political news can move exchange rates.
What does this mean for your portfolio?
Our portfolios are diversified across different regions, sectors, types of investment and fund managers. This approach is designed to reduce the effect of any one event or country, including a change in which party controls the US Congress. We are not changing portfolios simply because of the election. Instead, we will continue to use our established investment process and avoid reacting to short-term headlines. We are ready to make changes if the long-term outlook changes materially.
What this means for long-term investors
A divided US government remains the most likely result. It could create more political uncertainty, but is unlikely to lead to major policy changes in the near term. Trying to move in and out of markets around political events can be difficult. For long-term investors, staying focused on a diversified strategy can help avoid decisions based on short-term headlines. If you would like to discuss what the election could mean for your portfolio, please speak to your adviser.
This document is for information purposes only and does not constitute personal financial advice. If you are unsure about whether a particular course of action is suitable for you, we recommend that you seek independent financial advice.
The value of investments and the income from them can fall as well as rise, and you may get back less than you originally invested. Past performance is not a reliable indicator of future performance. Tax treatment depends on individual circumstances and may be subject to change in the future. Tax and estate planning outcomes are not guaranteed.
Titan Wealth Planning Ltd is authorised and regulated by the Financial Conduct Authority (FCA reference number: 574458). Registered address: 101 Wigmore Street, London, W1U 1QU, United Kingdom.
