usa conges

Gridlock favours the bull

Three scenarios for Washington and the markets
Philippe Gijsels, Chief Strategy Officer, BNP Paribas Fortis & Inge Donders, Head of Investment Communication, BNP Paribas Fortis
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Key Messages

  1. The 2026 midterms could reshape the balance of power in Washington, with control of both the House and Senate in play and prediction markets currently favouring a Democratic-leaning outcome.
  2. Three scenarios are possible, each with different market implications. Republican control would likely favour a looser regulatory and fiscal environment, while a blue wave (Democratic control of both the House and Senate) could benefit sectors such as healthcare and clean energy.
  3. Divided government and political gridlock may be the most likely outcome. This could limit major domestic policy changes without fundamentally reversing the direction of the Trump administration, particularly on foreign policy.
  4. Gridlock is not typically bad news for investors. Historically, US equities have performed well under a divided government, while the period following midterm elections has also tended to be supportive for stocks.
  5. We remain constructive on US equities. Strong earnings growth and continued AI investment should remain very supportive.