JPMorgan Chase: The probability of the Democratic Party sweeping both houses is 66%, while the Republican Party maintaining control of both houses is most beneficial for the U.S. stock market

JPMorgan conducted a scenario analysis on four potential congressional power combinations following the U.S. midterm elections. Among them, the probability of the Democratic Party winning control of both the House and Senate is the highest at 66%; the Republican Party's chance of retaining both chambers is only 7%, but this corresponds to the largest expected increase in the S&P 500 index among the four scenarios. In the scenario where the Democratic Party controls both chambers, the S&P 500 index could drop by 0.25% or rise by 0.5%. Concerns about stricter AI regulations and restrictions on data center construction may trigger a sell-off in AI concept stocks.

JPMorgan believes that even if legislation restricting the development of the AI industry is passed by Congress, it would be difficult to gather enough votes to override Trump's presidential veto. Therefore, it suggests that traders consider buying during pullbacks in tech stocks. Fiscal deficit spending may decrease, and long-term U.S. Treasury yields could face downward pressure. Some corporate executives associated with Trump's political donations may face greater risks of congressional investigations. The probability of the Democratic Party controlling the House and the Republican Party controlling the Senate is 26%, with the S&P 500 index expected to rise by 0.5% to 1%. The market may welcome the legislative stalemate brought about by the distribution of power, leading to a potential decline in long-term U.S. Treasury yields, although some companies and their leaders may still face congressional inquiries.

In the scenario where the Republican Party retains both chambers, the S&P 500 index is expected to rise by 1% to 1.25%. The market would not have to immediately face new congressional regulatory risks, and the additional policy pressures on tech companies would also be relatively limited; however, fiscal deficit spending may further increase, pushing long-term U.S. Treasury yields higher, and Trump may continue military actions against Iran. The probability of the Republican Party controlling the House and the Democratic Party controlling the Senate is 1%, with the S&P 500 index expected to rise by 0.25% to 0.75%. A split Congress could lead to more intense budget battles, potentially resulting in a federal government shutdown, and the Democratic Party could still conduct congressional investigations after gaining control of the Senate.