The US midterm elections have shifted the balance of power in Washington.

Democrats have won control of both the House of Representatives and the Senate, taking control when the new Congress convenes in January 2027, while Donald Trump remains president. The result may feel a long way from home, but US companies make up a substantial part of many US or North American focused and global equity funds held by investors. So what might the result mean for your investments, and is there anything you need to do?

What has changed?

As the BBC’s results explainer sets out, all 435 seats in the House of Representatives and 35 of the 100 Senate seats were up for election. With Democrats set to control both chambers, Donald Trump is likely to find it harder to get legislation through Congress over the next two years. Major changes to tax and spending are likely to require more negotiation between the parties. For investors, the implications will become clearer as those proposals take shape.

Markets were already weighing several issues before polling day, including interest rates, company earnings and whether heavy investment in artificial intelligence will translate into lasting profits. Those questions will continue to influence markets well beyond the election. For UK investors, movements in the pound against the dollar can also affect what returns on US holdings are worth in sterling.

What can history tell us?

Interactive investor highlighted that the S&P 500, an index of large US companies, was higher a year after each of the 20 midterm elections it reviewed since the Second World War. Each of those periods had its own backdrop for inflation, interest rates and company profits, so it is difficult to say how much of those gains was down to the election. Past performance is an unreliable guide to future returns.

What does this mean for your financial plan?

At Craven Street Wealth, we start with what you need your money to do and when you expect to need it. A portfolio set up to provide retirement income today may need a different balance of investments from one intended to grow over the next 15 or 20 years. Spreading investments across different markets and types of assets can help reduce reliance on any one country or sector. Keeping an appropriate amount in cash can also help meet planned spending without having to sell investments at short notice.

For most long-term investors, the election result alone is unlikely to warrant a change to a portfolio that remains suited to their circumstances. If you’re approaching retirement, planning a significant withdrawal or finding that market swings are harder to live with than you expected, please speak to your financial planner. We can look at how your investments are positioned and whether they still support the plans you’ve made.

Sources:

BBC News – US midterm election results

Interactive Investor – US midterm elections

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The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice.

Past performance is not a reliable indicator of future results and should not be relied upon when making investment decisions. The value of investments and any income from them can fall as well as rise. You may get back less than you invest and could lose some or all of your investment.

You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.

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