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SINGAPORE – The US Democratic Party took control of both houses of Congress in a dramatic win in the US midterm elections.
Seen as a rebuke of President Donald Trump’s policies, a sea of blue has picked up 53 Senate seats and 222 seats in the House of Representatives as at 3pm on Nov 4, Singapore time.
Voters sent a strong message about their unhappiness with the state of the US economy, the Iran war and inflation to kick Republicans out of even traditional “red” strongholds.
The elections, held on Nov 3, determine control of all 435 seats in the House of Representatives and about a third of the Senate, midway through Trump’s four-year presidential term.
Its implications will be felt far beyond the US’ borders as it raises the prospect of opposing forces between the White House and Congress.
What does this mean for global markets?
Equities: The Democratic sweep could make it harder for Trump to push through major legislative changes, potentially limiting further fiscal stimulus.
Analysts at BMI, a unit of Fitch Solutions, said Trump would likely face significant legislative resistance and policy gridlock, although he could continue pursuing policies through executive orders.
BMI also warned that a sharp slowdown in data-centre construction and artificial intelligence investment could lead to a greater-than-expected decline in overall investment, weighing on the US economy.
US equity futures fell as Democrats gained ground, with S&P 500 equity futures down about 1% at the time of BMI’s commentary. Technology stocks also faced pressure amid concerns over AI valuations and the prospect of tighter regulatory scrutiny.
Congressional aides said that while a rollback of tariffs is expected, Trump will remain undeterred in his zeal for more tariff actions.
In Asia, stocks started on Nov 4 down but retraced decisively after news of the Democrats’ win. Singapore’s Straits Times Index lost 76 points in the morning but was down just 12 points at 5,256.93 after the midday break.
Interest rates and bonds: The election outcome could influence US Treasury yields through expectations for fiscal spending, government borrowing and inflation.
Greater constraints on government spending could ease concerns over additional borrowing, although political disputes over fiscal policy may also create uncertainty.
BMI flagged the US debt-ceiling negotiations in 2027 as a major risk, warning that talks could become contentious at a time when Treasury yields are already elevated and fiscal risks are mounting.
DBS Group Research strategist Philip Wee noted on Nov 2 that the midterms, falling oil prices and the US employment report on Nov 6 could prompt investors to reassess the Federal Reserve’s tightening outlook.
The market-implied probability of a December rate hike had fallen to 73.5% from a peak of 90.8% on Oct 19, he said.
Currencies: The US dollar weakened as investors assessed the implications for fiscal spending and monetary policy.
Wee noted that the week’s developments could extend the dollar index’s retracement from its mid-October peak.
For Singapore investors holding US-dollar-denominated assets, movements in the greenback against the Singapore dollar could affect investment returns when converted into local currency.
Commodities: Oil and gold prices are also worth watching, particularly against the backdrop of the Middle East conflict.
Gold fell 0.5% to US$3,925.25 an ounce in New York trading on Nov 3, as investors weighed the prospects of a diplomatic resolution to the conflict. The precious metal had already slumped nearly 7% in October, falling below US$4,000 an ounce.
Lower oil prices have eased inflation concerns, although rising bond yields have weighed on gold, which does not pay interest.
The midterm results could increase policy uncertainty, although this may not necessarily translate into higher gold prices.
What does this mean for Singapore stocks?
DBS Group Research believes November presents an opportunity for investors to buy on market weakness, with Singapore real estate investment trusts (Reits), property developers and aviation-related companies among the potential beneficiaries of a Democratic win.
In a note published on Nov 3, ahead of the election results, DBS identified CapitaLand Integrated Commercial Trust, CapitaLand Ascendas Reit, City Developments Limited, UOL and SATS as stocks that could benefit under this scenario.
The bank outlined three possible election outcomes, with different sectors positioned to benefit depending on the composition of Congress.
Its Democratic-sweep scenario has now materialised, although the actual performance of these stocks will depend on how US policy and financial conditions evolve.
Investors will also be watching the Fed’s interest-rate outlook, movements in the US dollar and developments in the Middle East, which could have a more lasting influence on asset prices than the election result itself. THE BUSINESS TIMES
