On November 4, 2026, local time, Washington D.C., U.S. Capitol. Source: Visual China
Interface News Reporter | Liu Ting
The U.S. midterm elections of 2026 were held on November 3 local time. The counting results show that the Democratic Party has won control of both houses of Congress. This "Democratic control of Congress and Republican occupancy of the White House" split government structure means that political uncertainty in the United States has further increased.
Analysts point out that the overwhelming victory of the Democratic Party will impact U.S. policy mainly in four aspects: major legislation faces the risk of stagnation, the Democratic Party controls the congressional agenda, but Trump holds veto power, making it easy for both sides to become deadlocked; Congressional oversight and investigations will escalate, with the possibility of initiating impeachment proceedings against the president, but the Senate's conviction threshold is extremely high, making the chances of successful removal very low; personnel and budget face substantial constraints, the Senate can delay or veto Trump’s key personnel nominations, and the games around government shutdowns and the debt ceiling may escalate; foreign military policy will become a new battleground, as the Democratic Party may use defense spending approval to pressure an end to the conflict with Iran.
The "midterm elections" are elections for congressional representatives and local officials held between two presidential elections, often viewed as a referendum on the current president's performance. The losses for the Republican Party largely align with pre-election polls: Trump's approval rate has dropped from about 50% at the beginning of his term to about 39% in October 2026, with high prices and high fuel costs being the main reasons for his loss of public support.
The official counting results will be released after each state completes the statistics, verification, and certification, with certification usually occurring from mid to late November to December, and tightly contested districts potentially delayed due to recounts or legal disputes. The new Congress will be sworn in on January 3 next year, and the election results will formally take effect about two months later.
Political Tug-of-War Escalates
Analysts point out that with the Democrats controlling both houses and Trump holding veto power, Trump’s remaining term will be characterized by a tug-of-war pattern, mainly along three lines.
The first is legislation and budget, where bills find it difficult to land, with compromises relying on deals; pressure for a government shutdown is increasing.
The U.S. Constitution stipulates that tax and appropriation bills must first be proposed by the House of Representatives, thus allowing the Democrats to control the funding source for the federal government’s operation. The current timetable is especially urgent: the budget for fiscal year 2027 has not yet been passed, and the federal government will rely on temporary appropriations to operate until December 11, with the debt ceiling of $41.1 trillion leaving only about two months of space at the current borrowing level. The Democrats do not need to promote grand legislation; they only need to attach conditions to the appropriations bill that Trump cannot accept—such as extending Medicare subsidies, restoring cut welfare expenditures, and limiting the president's unilateral power to raise tariffs—putting the government under pressure to shut down.
Chief economist Luo Zhiheng of YuKai Securities told Interface News that although the government shutdown and debt ceiling struggle may escalate, there is unlikely to be substantive fiscal tightening. The reason is that a new round of tax cuts by the Republicans may struggle to get through a Democratic Congress, while the Democrats' proposals for tax increases and expanding benefits may also be vetoed by Trump, making it likely that both parties maintain the current revenue and expenditure framework, and the U.S. deficit rate is unlikely to see a significant decline. Furthermore, after the IEEPA tariffs were deemed illegal, the government was forced to refund tariffs to businesses, leading to a decline in tariff revenue and further constraining the fiscal space of the United States.
The second is in oversight and personnel, where investigations escalate alongside personnel blockages.
After the Democratic Party takes control of the House, the chairpersons of all committees will be Democrats. The subpoena power no longer requires coordination from the majority party leader or cross-party consent, allowing committee chairs to unilaterally compel government officials, presidential confidants, and family business partners to attend hearings and submit documents. According to Politico, Garcia and Raskin, who are expected to chair the House Oversight and Judiciary Committees, have already drafted investigation lists covering the Trump family's business interests, cryptocurrency profits, immigration enforcement controversies, and the decision-making process for military actions against Iran. Compared to 2018, this round is better prepared and emphasizes collaboration among committees and obtaining evidence from the private sector.
Luo Zhiheng pointed out that according to the U.S. Constitution, a simple majority in the House can pass articles of impeachment, but the Senate requires a two-thirds majority for conviction; historically, no president has ever been convicted by the Senate, making impeachment unlikely to succeed, but its significance lies in depleting the president’s political capital and building momentum for the 2028 election. In terms of personnel, nominations for federal judges, cabinet members, and agency heads must be confirmed by a simple majority in the Senate, allowing the Democrats to delay or even shelve nominations. Unlike in 2018 when the Republicans still controlled the Senate, Trump's executive power and institutional control may significantly weaken during the second half of this term.
The third is in foreign affairs and security, where external wars and tariffs are expected to encounter more constraints.
Tariffs, immigration, and foreign diplomacy are still under presidential executive authority, which Congress cannot directly halt. However, the Democrats can promote war powers resolutions, cut foreign military appropriations, require the president to obtain authorization or withdraw troops based on the War Powers Act, and add clauses to appropriations that limit Trump's unilateral military action. Specifically, the U.S.-Iran conflict may be forced to shift towards ceasefire and negotiation due to rising risks of internal dissent; the escalation of tariffs is constrained by both domestic price pressures and Congress's intent to recover trade authority, reducing the likelihood of full-scale tariff increases, though current tariffs will not be suddenly revoked but will tend to be regulated and more targeted.
Chief economist Song Xuetao of Guojin Securities told Interface News that, observing U.S. public opinion, the war with Iran has not received extensive support within the Republican Party, largely driven by Trump himself and a small group of pro-Israel individuals around him. Previously, there was little opposition within the party because Republican candidates tried to avoid opposing Trump ahead of the midterms to avoid losing their party's primaries. Now that the midterms are coming to an end and Trump will not have a third term, if he obstinately pushes for a large-scale resumption of the war with Iran, he may face risks of dissent within the party, for example, from establishment lawmakers.
According to a research report from Everbright Securities, overall, the Democratic Party's policy approach after the midterm elections is to prioritize advancing agendas related to the cost of living and healthcare, while initiating oversight investigations into the Trump administration, and then using Congress’s legislative and appropriations powers to balance tariffs and the U.S.-Iran war. However, if the Democrats want to repeal healthcare cuts in the tax cut bill, change tariff authorizations, or pass bills limiting war powers, these might be vetoed by Trump, and overriding a presidential veto requires two-thirds support in both houses, indicating that after the midterms, the debate between the two parties on these issues will intensify, leading to increased political uncertainty.
How Will U.S. Stocks, the Dollar, and U.S. Bonds Move?
For the capital markets, the overall impact of the midterm election results is shifting from "expansionary pricing" to "regulatory + fiscal constraint pricing."
U.S. stocks are temporarily trading on the "elimination of uncertainty" but rebound space should not be overestimated. Luo Zhiheng pointed out that since 1950, U.S. stocks have typically been strong in the year after midterm elections, but as of November 3, 2026, the S&P 500 has already risen by 10.6%, which is a relatively good level among previous midterm election years, while future performance will depend more on oil prices, the Federal Reserve, and AI realization. Everbright Securities believes that after the Democratic Party regains control of both houses, regulatory scrutiny around AI data centers, model security, antitrust issues, and the like will heat up, which may put pressure on the capital expenditure and valuations of tech giants.
U.S. bond rates are expected to trend down. U.S. bonds are the main beneficiaries of the "fiscal constraint" logic: Democratic control of both houses means that new tax cuts and large-scale spending bills are unlikely to materialize, and expectations for net supply of Treasuries are likely to be revised downward, with long-term rates trending downward. After the election results became clear, the yield on 10-year U.S. Treasuries fell back to around 4.9%, and the two-year yield briefly touched a two-month low.
The dollar may weaken moderately in the short term. The cooling of fiscal expansion expectations is depressing real interest rates and the attractiveness of dollar assets, with the dollar index briefly dropping to around 101.2 after the election situation became clearer. Meanwhile, tightening expectations around AI regulation are weakening the support that the "U.S. tech premium" provides to the dollar. However, some strategists warn that if U.S.-Iran negotiations break down or oil prices rebound, inflation and interest rate hike expectations may revive, thereby supporting the dollar.
Analysts remind that new Congress members will officially take office on January 3, 2027, and before this, the current Congress will continue to perform its duties. This transition period is not a power vacuum; rather, it may be a window where policy actions are most concentrated and expectations are most likely to fluctuate, reminding to be cautious of the "transition period expectation gap."
Everbright Securities cites an example that Trump may push for the 2027 fiscal year defense authorization bill before the handover, consolidating military and electoral alliances through long-cycle, high-capital projects like the "Iron Dome" missile defense system and the "Golden Fleet" navy expansion, which could temporarily increase expectations of expansion and heighten supply pressure on U.S. bonds, disrupting the downward pace of long-term rates.
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