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Electric Blue: Democrats Flip Control of House and Senate 

Andrew Foran, Economist | 416-350-8927
Thomas Feltmate, Director & Senior Economist | 416-944-5730

Date Published: November 4, 2026

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  • The results from the 2026 midterm elections showed a decisive shift in the balance of power in Washington, with Democrats obtaining majorities in both chambers of Congress. As of the time of writing, Democrats have won 228 seats in the House of Representatives and 54 seats in the Senate according to the Associated Press. Although these counts could be altered as new results come in, it won't change the overarching outcome of Democrats maintaining comfortable margins of control.  
  • This marks the first election since 2018 in which the Democrats gained seats in the House and the first majority for the party in the chamber since 2022. Though results are still being tabulated, projections from NBC and the New York Times based on races leaning Democrat show the ultimate majority for Democrats in the House could rival their 2008 level of over 250 seats. 
  • The Senate results were arguably more notable, with Democrats gaining seats in several states that had not elected a Democrat to the Senate for decades, including Texas, South Carolina, and Kansas. Additional gains in Maine, North Carolina, Iowa, and Ohio provided a net gain of 7 seats. Results from Alaska and Mississippi remain too close to call as of the time of writing. 
  • The overnight kneejerk reaction in financial markets saw a modest sell off in equity futures and dip in U.S. Treasury yields. This morning reflected a further drop in yields, with a curve sitting roughly 5bps lower. Markets are betting on political gridlock and a lower risk of major legislative changes that could result in deficit-financed initiatives. Equity markets opened higher, with the S&P 500 up 1.5%.  

Key Implications

  • With Democrats taking control of both the House and Senate, Washington has entered a period of divided government, significantly narrowing the administration’s legislative runway. Major Republican tax and spending initiatives will now be much harder to advance, while Democratic priorities will face the threat of a presidential veto in addition to the 60-vote filibuster threshold in the Senate.  
  • In the near term, the lame-duck session of Congress will likely need to pass a continuing resolution (CR) to fund the federal government beyond December 11th. Limited progress has been made on the full-year appropriation bills so far. It is possible Congress may opt to fund the government through a full year CR as they did last year. Funding the federal government is likely to be one of the more contentious obligations of the new session of Congress, in addition to addressing the federal debt limit when it is expected to become binding in mid-2027. Senate confirmations for Presidential appointments, including those for cabinet members, federal justices, and members of the Federal Reserve Board of Governors, will also likely be a more challenging process during the new session.  
  • One area where Congressional Democrats will have little influence is on trade. While control of Congress gives them greater ability to challenge the administration's trade agenda and push for constraints on presidential tariff authority, many existing measures were imposed using authorities delegated to the executive branch by Congress. To overrule these authorities, Congress would need to pass a resolution with a two-thirds majority in each chamber to circumvent the President’s veto. This is a high watermark and is unlikely to occur.  
  • From an economic outlook standpoint, the implications from the midterms are expected to be relatively modest. Political gridlock could produce greater fiscal constraint, which may  ease pressure on Treasury yields at the margin. However, it may also lead to limited fiscal reform to address the sustainability of the national debt and potential brinkmanship around fiscal deadlines which could have the inverse effect. It is possible that some of the newly flipped states will place greater restraint on new AI infrastructure investment, but the intentions to spend by the industry were not fully reflected in our forecast.  
  • The new Congress will inherit an economy that is gaining momentum into year-end, with 2026 growth likely to accelerate to 2.5% on a Q4/Q4 basis. This stronger handoff should provide a solid foundation for growth in 2027, even in an uncertain policy environment.  

 

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