Midterm election results could shift leverage for major U.S. companies

The 2026 midterm election could change which party holds power over federal spending and corporate oversight.

A Democratic win in either chamber of Congress would grant lawmakers committee control and subpoena authority. This would allow them to demand documents and compel testimony from corporate executives. President Donald Trump would retain his veto power and executive control over tariffs and immigration regardless of the outcome.

Morgan Stanley analysts published a study on Thursday showing that stocks have historically performed better under divided government. The S&P 500 gained an average of 23% in the year following midterms when Congress was split under Republican presidents. That figure compares to a 16% gain when Democrats controlled both chambers. Ariana Salvatore, head of U.S. public policy research at Morgan Stanley, said she does not think that historical blueprint holds up this time.

Companies are already facing increased scrutiny. On Oct. 21, Sen. Richard Blumenthal sought records from donors to the White House ballroom, including Cisco and Apple. Rep. Jamie Raskin has sought records regarding tariff exclusions and communications involving Tim Cook. Monica Guerra of Morgan Stanley noted that such probes create volatility through negative headlines. Democrats have also signaled interest in investigating Trump family businesses and firms tied to Elon Musk.

Healthcare spending is a primary point of contention. The 2025 tax cuts and spending law will reduce federal Medicaid spending by $911 billion through 2034. Molina Healthcare derives 75% of its premium revenue from Medicaid. New work requirements for enrollees take effect Jan. 1. A Democratic-controlled chamber could use budget negotiations to seek funding changes or delays to these cuts. Jeff Buchbinder of LPL Financial said Democrats will likely push back on Medicaid cuts to stabilize enrollment.

Defense contractors face a battle over the fiscal 2027 budget. The White House requested $1.5 trillion for national defense and a separate $87.6 billion supplemental appropriation for fiscal 2026. Lockheed Martin has a framework agreement for 850 F-35 jets, but Congress must authorize the multiyear purchase. Democrats may challenge Iran-related spending while pushing for more aid to Ukraine. Bipartisan consensus on China deterrence could protect other major programs.

The crypto industry awaits permanent regulatory rules. Shares of Coinbase and Circle fell as much as 11% in September when the Senate failed to advance the Clarity Act. Democratic gains could lead to demands for stricter consumer safeguards. In the AI sector, the House voted 417-3 in September to require state regulators to consider making data centers cover electricity infrastructure costs. The measure stalled in the Senate. Morgan Stanley expects hyperscalers to spend more than $1 trillion on capital projects in 2027.