What are the US midterm elections and why do they matter for investors?

The US midterm elections are just around the corner, beginning on the 3 November 2026. This is a pivotal moment for investors as the world’s largest economy heads out to vote on who will control Congress. With American politics growing increasingly polarised, these results could end up significantly shaping future policy direction.

What are the US midterm elections?

The US elects a new President every 4 years. But at the halfway mark the public vote in the midterms, where they vote on who controls Congress.

This is important because to pass new legislation, the President must secure Congressional approval. Congress consists of two chambers – the House of Representatives (lower chamber) and the Senate (upper chamber).

The House introduces and votes on bills, budgets, and appropriations. It can also conduct investigations – including impeachment proceedings. The Senate, meanwhile, reviews and votes on legislation, confirms appointments, and plays a key role in shaping national policy.

In November, all 435 members of the House of Representatives are up for re-election and 35 out of 100 Senate seats are up for grabs. Senators typically serve a six-year term, so their elections are more staggered; Representatives serve two-year terms, meaning they’re all up for election.

Currently, there’s what’s referred to as a ‘red wave’. Republicans control the White House and hold slim majorities in both the House and Senate. Republicans hold 220 seats compared to the Democrats' 215 in the House. In the Senate, the Republicans hold 53 seats and the Democrats 47. This red wave has made it easier for President Donald Trump to push through legislation.

What does history tell us

The ‘midterm iron law’ suggests that the controlling party in the White House typically struggles in midterm elections, especially in the House. This happened in 2022, when then-President Joe Biden and the Democrats lost control of the House.

In the 20 midterm elections since the end of the Second World War, 18 of them resulted in the president’s party losing seats in the House. The only exceptions were Democrat Bill Clinton in 1998 and Republican George W. Bush in 2002.

We will have to wait and see if history repeats itself, but on average 26 seats in the House change hands in the midterms. Given the Democrats need to flip only three, it’s expected that they will take back control of the House.

What do the current polls suggest

It’s not just history on the Democrats' side: so are the polls. Currently, Trump’s overall approval rating is sliding.

For context, in the 2018 midterm elections during Trump’s first term, he had an approval rating of 36% with independent voters and his party went on to lose 41 seats. Trump’s current approval rating with independents is 34%.

There are a number of issues driving Trump’s low approval rating, but the biggest driver is his handling of inflation and lowering prices.

This isn’t surprising. Trump promised to curb inflation; but following the US war with Iran, inflation is back on the rise. In June, it stood at 3.5% after peaking at 4.2% in May. Back in February before the conflict started, inflation was at 2.4%, marginally above the Federal Reserve’s 2% target. Americans are also concerned with Trump’s overall handling of the economy and of foreign policy and immigration.

What this means for investors

With more than 60% of Americans invested in the stock market, the results of the midterms will not only affect people’s political views, but it could also impact their investments.

Despite Trump’s low approval rating, the US stock market has generally been performing well.

The S&P 500 has returned 26.30% over the last 12 months, with smaller companies returning 42.36% – though past performance isn’t a guide to future returns. But this is with the red wave and Trump generally being able to make changes at will. This could sway some voters in favour of a continuation of the red wave.

If the Republicans retain control of Congress, Trump’s pro-market legislative agenda could end up accelerating. But if Democrats win a majority in even one of the chambers, they could block future bills and stall his policy initiatives. A split Congress – where control is divided – has occurred many times before, often leading to legislative gridlock.

Annual Percentage Growth

The S&P500 is a product of S&P Dow Jones Indices LLC and has been licensed for use by Hargreaves Lansdown Asset Management