Huoxing Finance reports that on November 3, J.P. Morgan conducted a scenario analysis of four possible congressional power configurations following the U.S. midterm elections. The highest probability scenario is a Democratic sweep of both chambers, at 66%; the probability of Republicans maintaining control of both chambers is only 7%, yet this scenario carries the largest expected gain for the S&P 500 index among the four. **Democratic control of both chambers (66% probability):** The S&P 500 may decline by 0.25% or rise by 0.5%. Concerns over stricter AI regulation and restrictions on data center development could trigger selling pressure in AI-related stocks. However, J.P. Morgan believes that even if legislation limiting the AI industry passes Congress, it is unlikely to garner sufficient votes to override a presidential veto by Trump; thus, traders are advised to consider buying technology stocks on pullbacks. Fiscal deficit spending may decrease, putting downward pressure on long-term U.S. Treasury yields, while corporate executives with ties to Trump’s political donations may face heightened risks of congressional investigations. **Democratic control of the House, Republican control of the Senate (26% probability):** The S&P 500 is expected to rise by 0.5% to 1%. Markets may welcome legislative gridlock resulting from divided power, as neither party can unilaterally advance major policies or significantly expand government spending. Long-term Treasury yields may decline, but certain corporations and their leaders could still face congressional investigations. **Republican control of both chambers (7% probability):** The S&P 500 is projected to rise by 1% to 1.25%. Markets would face no immediate new congressional regulatory risks, and technology firms would encounter relatively limited additional policy pressure. However, fiscal deficit spending could further increase, pushing long-term Treasury yields higher; potential military action by Trump against Iran also represents a risk under this scenario. **Republican control of the House, Democratic control of the Senate (1% probability):** The S&P 500 is expected to rise by 0.25% to 0.75%. Divided control of Congress could intensify budget battles, potentially leading to a federal government shutdown. Even with Democratic control of the Senate, congressional investigations can proceed, and the risk of investigations targeting related companies and individuals would persist.
JPMorgan Scenarios: 66% Chance Democrats Win Both Houses in US Midterm Elections
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Summary
JPMorgan sees a 66% chance that Democrats will win control of both the House and Senate in the U.S. midterms. Value investing in crypto remains a key strategy amid political uncertainty. Under this scenario, the S&P 500 could decline by 0.25% or rise by 0.5%. Market risks include AI regulation and data center restrictions, which may pressure tech stocks. JPMorgan advises buying tech during pullbacks, noting that restrictive AI laws would likely be vetoed by the president. Support and resistance levels in the S&P could shift depending on election outcomes. Other scenarios include a 26% chance of a split Congress and a 7% chance of Republican control.
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