JPMorgan: Democrats have a 66% chance of sweeping both chambers; Republicans retaining control of both chambers would be most bullish for U.S. equities.

JPMorgan has conducted scenario analysis around four possible congressional power configurations following the U.S. midterm elections. Across all scenarios, the Democrats retaining control of both the Senate and the House remains the most likely outcome—at 66%. In contrast, the Republicans maintaining control of both chambers is the least probable scenario, at just 7%; yet under this configuration, the S&P 500 is projected to post the strongest gains among all four cases. If Democrats win both chambers, the S&P 500 may dip slightly by 0.25% or rise modestly by 0.5%. Markets are concerned that stricter AI regulation and restrictions on data center construction could trigger a sell-off in AI-related stocks. However, JPMorgan notes that even if legislation curbing AI industry growth passes Congress, it would be extremely difficult to muster the two-thirds supermajority required to override a presidential veto—potentially exercised by Trump—and thus advises traders to consider opportunistically adding exposure to tech stocks during pullbacks. Additionally, fiscal deficit spending may contract, weighing on long-dated U.S. Treasury yields; part of this pressure stems from political donations linked to Trump.