- More than half of the 301 respondents to Bloomberg’s Markets Pulse survey, conducted Oct. 2-17, expect Treasury yields to fall over the 12 months after a Democratic sweep of Congress at the Nov. 3 midterms. Only 36% expect yields to decline under a split Congress, and 26% if Republicans control both houses.
- Stocks show the opposite pattern. More than 60% expect the S&P 500 to rise in the year after an all-Republican Congress, while 58% expect a decline under a Democratic sweep, mainly because Democrats are seen as more likely to support regulation that slows the AI boom. More than 60% said stricter AI regulation would hurt stocks over the following 12 months.
- Respondents also flagged fiscal risks. Nearly half said a bond selloff would be the biggest market consequence of a prolonged debt ceiling fight next year, with current borrowing authority on track to run out in the second half of 2027. Nearly 60% named foreign policy, in particular the war with Iran, as the biggest risk after the midterms.
- Wells Fargo’s Ohsung Kwon said a blue wave raises the odds of more and more severe data center moratoriums, which could mean a slower AI buildout and a more defensive market. Still, Wells Fargo found the S&P 500 has risen in the 12 months after every midterm election since World War II, and 55% of respondents said they would not seriously consider selling US stocks whatever the result.
What Happened?
Bloomberg’s latest Markets Pulse survey asked 301 respondents how different midterm outcomes would affect US assets over the following year. A Democratic sweep was most often linked to falling Treasury yields, partly because tighter AI rules could slow growth, which would boost the appeal of bonds. Invesco’s Robert Waldner said an anti-AI takeaway from the midterms “could have an impact on growth” and would likely cause a Treasury rally. A Washington Post-ABC News-Ipsos poll published Oct. 18 showed Democrats with an eight-point lead among registered and likely voters, while the Senate outlook is less certain.
Why It Matters?
The survey shows how closely the AI trade and the bond market are now tied to politics. A government more willing to regulate AI and data centers could weigh on big tech earnings, which have driven recent rallies, while supporting Treasuries. Capital Advisors Group’s Eric Souza said a Democratic House would mean less fiscal legislation, which should help keep rates contained. The S&P 500 had gained about 1.3% per month on average through September, and 65% of respondents said that pace would accelerate or hold under Republican control, versus 37% under Democrats and 44% under a split Congress.
What’s Next?
The Nov. 3 vote is the near-term catalyst, with the House seen leaning Democratic and the Senate a closer call. After the result, investors will look for signals on AI regulation and data center rules, which survey participants see as a key risk for equities. The debt ceiling fight expected next year is the main fiscal risk for bonds. Developments in the war with Iran were cited as both the largest potential risk and, if it ends, the largest potential benefit for US assets.
Affected Tickers and Coins: TLT, IEF, SPY, QQQ
Source: Bloomberg
