- Washington is part of the business model. Lockheed Martin gets about 70% of its sales from the US government, Medicaid accounted for $32.2 billion, or 75%, of Molina Healthcare’s 2025 premium revenue, and Coinbase is waiting on Congress to finish crypto rules. A Democratic win in either chamber would give the party committee gavels, subpoena power and leverage over spending, although President Donald Trump would keep his veto and broad authority over tariffs, immigration and regulation.
- History favors gridlock, but strategists are cautious. Under Republican presidents, the S&P 500 has gained an average of 23% in the year after midterms when Congress was split, versus 16% when Democrats controlled both chambers, according to a Morgan Stanley analysis. “We don’t think that blueprint holds up this time around, and we still see plenty of reasons to be constructive on the U.S. equity market,” said Morgan Stanley’s Ariana Salvatore.
- Spending fights hit healthcare and defense. Trump’s 2025 tax and spending law is projected to cut federal Medicaid spending by $911 billion through 2034, according to a KFF analysis of CBO estimates, and Democrats are likely to push back on those cuts. The White House has requested $1.5 trillion for national defense in fiscal 2027 plus an $87.6 billion fiscal 2026 supplemental tied mainly to Iran operations, while Lockheed’s framework deal for 850 F-35s over a decade still needs Congress to authorize and fund it.
- Crypto and AI face rule-making risk. The Senate failed to advance the Trump-backed Clarity Act in September, sending Coinbase and Circle down as much as 11%, and Democratic gains could bring demands for limits on yield-bearing stablecoins. On AI, Morgan Stanley expects hyperscalers to spend more than $1 trillion on capital projects in 2027, yet 63% of registered voters oppose a data center within 10 miles of their home, according to CNBC’s All-America Economic Survey.
What Happened?
With the midterm elections on Tuesday, CNBC examined which industries are most exposed to a shift in congressional control. Democrats are already previewing oversight: Sen. Richard Blumenthal has sought records tied to Trump’s White House ballroom from donors including Cisco, Salesforce, ServiceNow and Kraken, and Rep. Jamie Raskin has sought records involving tariff exclusions. On banking, regulators estimate their proposed capital overhaul would cut requirements for the largest banks by roughly 4.8%, and Senate control shapes who fills future Fed vacancies. On data centers, the House voted 417-3 in September to require state regulators to consider making large data centers cover added electricity infrastructure costs, but the measure stalled in the Senate on a 57-43 procedural vote.
Why It Matters?
For investors, the election is less about the index than about which business models depend on Washington. Congressional probes consume executive time and create headline risk, which Morgan Stanley’s Monica Guerra said “creates volatility because you get a negative headline.” Budget leverage could decide billions of dollars in defense orders and Medicaid funding, while crypto’s regulatory gains under Trump remain reversible without legislation. As CFRA’s Sam Stovall put it, the crypto industry mostly wants “to know what the rules are going to be for the coming year.”
What’s Next?
Results begin arriving late Tuesday, and control of each chamber will set the agenda for oversight hearings, must-pass budget talks and crypto market-structure legislation. Defense investors should be stock pickers, Guerra said, pointing to shipbuilding, autonomous systems and missile defense as likely winners given bipartisan support for China deterrence. Medicaid work requirements take effect Jan. 1, and fights over data center power costs will also play out at the state and local level regardless of who controls Congress.
Affected Tickers and Coins: LMT, MOH, COIN, CRCL, ITA
Source: CNBC
