Congressional Control Slips as Markets Face an Unpredictable White House Term
Donald Trump has lost control of both the House of Representatives and the Senate following a midterm Democratic sweep, putting the global economy on notice for an erratic final two years in office. Financial markets dropped initially in early Asian trading before rallying as investors weighed the election outcome. Traders face a turbulent political environment with the president warning he will become "Mr Veto" to block congressional action.
Holger Schmieding, chief economist at Berenberg, said the midterm results showed voters rejected Trump and his authoritarian penchant for crony capitalism. Schmieding added that the outcome proves United States institutions and checks and balances work effectively. Much of the economic outlook remains contingent on the war in the Middle East and the pace of artificial intelligence advancements. Democrats are expected to take a tougher line on artificial intelligence regulation and data center rollouts.
Energy Pressures and Inflation Push Central Banks to Raise Interest Rates
US diesel prices surged to a record high in August while headline inflation climbed to 3.7%. The US-Israeli invasion of Iran closed the critical Strait of Hormuz, triggering a major global energy price shock. Brent crude fell up to 9% on Wednesday to trade below $100 a barrel for the first time in a month at about $94, remaining significantly higher than its prewar level of $70. The International Monetary Fund expects global headline inflation to reach 4.7% this year, hitting energy-importing nations hardest.
Central banks have raised borrowing costs in response to persistent inflation. The US Federal Reserve defied pressure from Trump by increasing interest rates for the first time since 2023, with investors anticipating at least one more rate hike. The Bank of England and the European Central Bank are also expected to push up borrowing costs. Republicans now lack the votes in Congress to confirm new public body appointments, including Fed governors.
Government Borrowing Costs Face December Spending Test
Higher inflation and interest rates driven by the Iran conflict have inflated government borrowing costs globally. The US political system faces its first major test on December 11, when lawmakers must authorize government spending to avoid a federal shutdown. Political gridlock could block Trump from launching new tax and spending measures, restricting fiscal stimulus while limiting further increases in public debt.
Coca-Cola HBC AG reported third-quarter net sales revenue up 9.6% with volume up 5.4%, prompting an upgraded fiscal year revenue guidance slightly above its 6% to 7% range. Smith & Nephew posted third-quarter revenue up 3.4% to $1,551m driven by strong sports medicine and ENT performance. Metro Bank Holdings recorded total lending up 5% to £9,425 million with a net interest margin increase to 3.45%. Smiths News reported final results for the 52 weeks ended August 29, 2026, showing revenue down 2.6% to £1,036.2m and adjusted profit after tax up 1.5% to £27.4m.
Investors are keeping a close eye on the elections today. I’m curious myself to see how these results could shake up business. https://t.co/e0cojZ2XoU
Frequently Asked Questions About the Midterm Aftermath and Market Impact
How much did Brent crude oil prices drop following the midterm elections?
Brent crude fell by as much as 9% on Wednesday to trade at about $94 a barrel, dropping below $100 for the first time in a month.
What key legislative deadline approaches for the US government?
Lawmakers must agree to authorize government spending by December 11 to avoid a federal government shutdown amid a logjammed political system.
What is Berenberg forecasting for US economic growth by 2028?
Berenberg analysts project that US economic growth could slow to about 1.5% in 2028 due to political gridlock, artificial intelligence slowdowns, and immigration crackdowns.
What were the annual results for Smiths News for the period ending August 2026?
Smiths News reported revenue down 2.6% to £1,036.2m and adjusted profit after tax up 1.5% to £27.4m for the 52 weeks ended August 29, 2026.
More on Donald Trump
The US midterm election "shows that the political underpinning of the rapid, aggressive AI growth story is shaky," @jfkirkegaard says. "It doesn't mean it's going to stop or be made illegal, but the dynamic of the growth story has shifted." https://t.co/5BqreEUqhg
The initial market reaction to the Democrats’ stunning win in the midterm elections is defying standard playbook expectations: Stocks are higher and government bond yields are lower (CNBC data below). What analysts would have likely predicted, however, is the performance within… pic.twitter.com/MIXvfFG6vx
- Tennessee Governor suspends executions after Christa Pike botched execution
- Trump rejects exit plans for defense secretary Hegseth after election losses
- Senate Majority Leader Michael Lee Defeated in Reelection Bid (news-usa.today)
- Jimmy Kimmel uses satire to target Trump after Democratic midterm wins (archyworldys.com)