The US Midterms Delivered a Democratic Sweep and a Market Whiplash: What It Means for Your Portfolio From Abroad

November 2026

By Will Glyn

On Wednesday 4th November, the Dow Jones Industrial Average, the index of 30 large US companies, closed up 1,569 points, or 3.03%. CFRA Research says it was the Dow’s biggest one-day gain after a midterm election since 1982. A day later the Nasdaq Composite fell 5.5% and closed in correction territory, the usual label for a drop of 10% or more from a recent high. The Dow gave back more than Wednesday’s gain, losing over 1,800 points.

Both moves followed the same election. Democrats won control of the House and the Senate on 3rd November, while Trump stays in the White House. When prices swing that far in 48 hours, it is tempting to read the move as a verdict on the next two years. I see a lot of investors do exactly that with their US holdings.

A divided Washington changes less for a long-term portfolio than this week's swings suggest, though it does shift the risk for a few industries.

Two days, two different stories

Wednesday was relief. The result was decisive, the uncertainty was over, and the S&P 500 rose 1.58% while the Nasdaq rose 1.44%. Thursday was dominated by one theme. The S&P 500 fell 4.4% and the Nasdaq closed at 24,315, nearly 12% below its record close on 6th October.

The selling hit AI, chip and data-centre shares hardest. Many Democrats campaigned against data-centre expansion, and dozens of towns and cities voted for restrictions on new ones. The Nasdaq had already had a rocky few weeks before the vote, so the election result added to a fall that was already under way.

What the record says about the year after a midterm

J.P. Morgan Asset Management’s figures show the S&P 500 has risen in the 12 months after every midterm election since 1950, 19 out of 19, with an average gain of about 15%. That is a small sample, so it describes the past and is not a promise for the next twelve months. The weakest of the 19 gained only about 1%, after the 1986 midterms, and that window included the October 1987 stock market crash.

A positive twelve months does not mean a smooth route either. After the 2018 midterms, when Democrats won the House in Trump’s first term, the S&P 500 rose 2.1% the next day, then was down 1.2% a week later and 2.2% a month later, according to CNBC. It ended 2018 down 6.2% for the calendar year (about 9% below its election-day close) and was still up 11.7% a year after the election. Anyone who judged that result by its first week would have drawn the wrong conclusion.

Why gridlock tends to calm things down

With Democrats running Congress and a Republican in the White House, any large tax or spending bill needs both sides to agree, and that bar is high. Fewer sweeping changes means fewer new rules for companies to price in. Since 1980, the S&P 500 has averaged a 15% gain in the year after divided-government outcomes, against 11.5% under single-party control, in CNBC’s analysis.

Among midterms since 1980, the closest precedents are 1986, 1990 and 2006, when Democrats held both houses under a Republican president. On the day after the vote the S&P 500 averaged a 0.5% decline. A month later it was up 3.4%, and a year later it was up 10.9%. So a wobble followed by gains is not unusual.

Nobody can say how much of the long-run record comes from gridlock and how much from earnings and the economy, and I would not claim to know.

What has actually changed

The election has changed the political risk attached to particular industries. That is a narrower thing than “the market”, and this week’s moves show where it sits:

• AI and data centres — Democratic campaigns leaned on voter unease about data-centre building, and local restrictions are already spreading. Data-centre operators Applied Digital, Cipher Digital and IREN each fell more than 14% on Thursday.
• Defence — Lockheed Martin and General Dynamics fell on worries that a Democratic Congress would limit spending and block big Trump-backed projects such as Golden Dome, the US missile-defence programme.
• Renewables — Solar and other renewable shares rose, with a solar-focused fund up 7% on Wednesday.
• Healthcare — The outlook is mixed. Democrats are expected to push on healthcare costs and drug pricing, which cuts both ways for different companies.

The other change is oversight. From January, Democratic committee chairs in both chambers will be able to compel agencies and businesses to hand over documents or testify, and defence contractors, healthcare firms and banks are among the likelier targets. The risk there is often headlines rather than law. A hearing can move a share price without changing a single statute.

What has not changed

I can’t see anything in this week’s results that rewrites the profit outlook for the broad run of US companies. The benefits of spreading money across many sectors and countries are the same on Friday as they were on Monday. Your own plan, whether that is a retirement date, a school-fee bill or a property purchase in three years, hasn’t moved either.

The trouble is that sector shocks land hardest on portfolios that were already leaning one way. Say 40% of your money sits in tech-heavy US funds. If those funds fell in line with the Nasdaq, a drop of nearly 12% from the October peak would take roughly 4.8% off the whole portfolio, since 40% of the money fell by about 12%. A portfolio spread across sectors and regions would typically feel less of it. That example is only an illustration of how the sums work.

What I would do with this week

• Check your sector concentration — Look through the wrappers. A UK ISA or pension, a French PEA, a US 401(k) or Roth IRA and Australian super can all end up holding the same handful of AI-linked names. Add them together before deciding whether you are comfortable.
• Stay away from headline-driven trading — An investor who bought on Wednesday’s 3% jump in the Dow and sold on Thursday’s drop paid for two bad decisions and gained nothing from either. If a change is needed, make it against a rule you set in advance, such as a maximum weight for any one sector.
• Keep an eye on the political calendar — The new Congress takes over in January, and its committee chairs will set their agendas then. That is useful context for sectors like defence, healthcare and data centres, and a good moment to review your holdings rather than react to each headline.

I can’t tell you whether the data-centre worries will deepen or fade, and nor can anyone else. At the end of the day, what I can do is help make sure a bad few weeks in one corner of the market doesn’t derail the plan.

How We Can Help

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If you would like a second pair of eyes on how your portfolio is positioned after this week, book a call with me.

Will is an Independent Financial Adviser with over a decade of experience helping expats make the most of their international status.