Midterm elections could jolt stocks if Democrats sweep Congress

The US Capitol is reflected in the Capitol Reflecting Pool in Washington, DC, US, October 27, 2026.Umit Bektas | ReutersThe stock market is not yet pricing in a Democratic sweep of Congress — despite some polls and most prediction markets pointing that way — so that scenario could weigh on share prices Wednesday, according to investors and analysts.Republicans managing to keep control could cause a short-term relief rally, they said.Short-term moves aside, the typical post-midterm pattern in the months ahead is bullish. But some wonder if the market could buck the positive historical trend this time because the S&P 500 is already up so much this year going into the election.As far as certain stocks to watch, a big Democratic win on Tuesday night — especially in the Texas governor race — could add fuel to an AI stock sell-off on the notion that more data center restrictions would gain momentum nationally. Defense stocks could come under pressure on fears of limits on spending. Expected stock market reactionPolls are pointing to a Democratic victory in the House and a toss-up in the Senate. Prediction markets have been more favorable to Democrats, calling for a blue sweep. While ...