In anticipation of the Democratic sweep in one of the most closely watched mid-term elections, the US dollar index, as well as Treasury yields, have tumbled significantly as markets price in lesser Republican control.
The global eye is on the price of crude oil, as expectations are that a Democratic Congress may pressure President Trump to withdraw from the Iran conflict, which would lead to oil prices seeing a breather. However, this could be challenged as historically, Trump has not paid heed to Congress, instead he has relied on a series of executive actions and emergency powers to fulfill his whims.
Financials, energy, and parts of Big Tech could face the greatest initial pressure following a Democratic sweep, given greater oversight of deregulation, fossil fuels, AI, and large technology companies, said Emkay Global, adding, "Alongside the possibility that a strong Democrat result brings the risk of higher taxes and tighter regulation after 2028 into focus earlier."
Energy faces an additional near-term risk if elevated oil prices begin to reverse, although Trump would retain considerable executive power over permits and energy regulation.
A Democratic Congress would increase scrutiny of Trump's tariff policies and also challenge their implementation through legislation. However, Trump will retain considerable executive authority over trade policy. This implies that there will not be a quick rollback of tariffs. For firms with exposure to global supply chains, manufacturing costs and imported inputs, this remains a key monitorable.