The U.S. midterm election could change the balance of power between Washington and companies whose businesses depend heavily on government contracts, public spending or regulation. Defense, healthcare, cryptocurrency, banking and artificial intelligence are among the sectors most exposed to the outcome.
A Democratic victory in either chamber of Congress would give the party control of key committees and subpoena power. That would allow lawmakers to demand documents, compel testimony and bring executives before public hearings. However, President Donald Trump would retain his veto and broad authority over tariffs, immigration and federal regulation.
Historically, stocks have performed well under divided government. Morgan Stanley found that, under Republican presidents, the S&P 500 gained an average of 23% in the year after midterms when Congress was split, compared with 16% when Democrats controlled both chambers. Analysts often link that performance to congressional gridlock, which can limit sweeping policy changes. Morgan Stanley researchers cautioned that the historical pattern may not necessarily apply this time.
The election could nevertheless create volatility for companies that become targets of congressional investigations. Recent inquiries have sought records involving corporate donations to a White House ballroom project and tariff exclusions connected to Apple. While donations do not establish wrongdoing or favorable treatment, subpoenas can consume executives’ time, expose internal communications and generate damaging headlines.
Healthcare companies could be affected by the future of Medicaid. President Trump’s 2025 tax and spending law is projected to reduce federal Medicaid spending by $911 billion through 2034, according to a KFF analysis of Congressional Budget Office estimates. New work requirements are scheduled to begin on January 1, or earlier in some states, while tighter state budgets could reduce coverage and put pressure on provider payments.
Molina Healthcare received $32.2 billion, or 75%, of its 2025 premium revenue from Medicaid, according to its annual filing. The company warned that losing government contracts or failing to renew them on favorable terms could materially reduce premium revenue. A Democratic-controlled chamber could not repeal the law alone, but lawmakers could use budget negotiations to seek changes or delays to some reductions.
Hospitals could also face higher uncompensated-care costs if fewer people remain insured, while state budget pressures reduce reimbursement rates. Congress has created a $50 billion rural health fund over five years, although KFF and healthcare providers have said it would not fully offset the broader Medicaid reductions. At the same time, Democratic lawmakers could increase scrutiny of insurers, hospitals and drugmakers over prices, coverage and profits.
Defense contractors face uncertainty over which weapons and military programs Congress will fund. The White House has requested $1.5 trillion for national defense in fiscal 2027, as well as an $87.6 billion supplemental appropriation for fiscal 2026, driven primarily by military operations related to Iran.
A Democratic Congress could challenge some spending related to Iran and Israel while seeking more aid for Ukraine. Analysts said bipartisan support for China deterrence, nuclear modernization and missile defense could protect other major programs. Lockheed Martin, which receives about 70% of its sales from the U.S. government, has reached a framework agreement with the Pentagon for 850 F-35 fighter jets over a decade, but Congress must still authorize the multiyear purchase and provide funding.
In cryptocurrency, the election could determine whether the regulatory changes associated with the Trump administration become permanent law. The industry’s efforts stalled in September when the Senate failed to advance the Trump-backed Clarity Act, a market-structure bill. Coinbase and stablecoin issuer Circle saw their shares fall by as much as 11% after the vote failed.
A new attempt to pass legislation could give Democrats leverage to seek stronger consumer protections, limits on yield-bearing stablecoins and greater scrutiny of Trump’s crypto businesses. For the industry, however, the main priority remains clarity over the rules that will apply in the coming year.
Banks are also seeking regulatory certainty. Federal regulators estimate that their proposed capital overhaul would reduce requirements for the largest banks by about 4.8%, potentially freeing billions of dollars for lending and shareholder payouts. Although the Federal Reserve writes the rules, Senate control would influence future regulatory appointments, while congressional committees could pressure agencies through hearings and investigations.
Artificial intelligence and data-center construction may be among the most politically complicated areas. President Trump has made rapid data-center development an economic and national-security priority. Morgan Stanley expects hyperscalers such as Microsoft, Amazon, Alphabet and Meta to spend more than $1 trillion on capital projects in 2027, even as communities challenge the impact on electricity bills, water use and infrastructure.
An October CNBC survey found that 63% of registered voters opposed having a data center within 10 miles of their home, compared with 13% who supported the idea. The House previously voted 417-3 for a measure requiring state regulators to consider making large data centers cover additional electricity infrastructure costs. The measure later stalled in the Senate on a 57-43 procedural vote after Democrats argued that stronger mandatory protections were needed.
Democratic gains could therefore place more grid-upgrade costs on technology companies, increasing project expenses while limited power availability already constrains new construction. State regulators, utilities and local governments would continue to decide where projects connect to the grid and which facilities are built, making the election’s effects particularly dependent on local decisions.
Sources: CNBC Markets.