US mid-term elections: a lame duck President?

The US mid-term elections delivered a strong swing towards the Democrats, who appear to have won control of both the House of Representatives and the Senate.  

What does a more constrained final two years mean for President Trump, and for investors? Jupiter’s fund managers share their views.  

Amadeo Alentorn, Lead Investment Manager, Systematic Equities

"A Democratic Congress will reduce the administration’s ability to pass legislation, with more policy likely to come through executive action and more congressional scrutiny of that action. Voters appear to have been concerned by the higher cost of living (annual CPI inflation rose to 3.7% in September) and the continuing war between the US and Iran. 

While the mid-terms are significant, one could argue that the result represents just another drop in a sea of uncertainty. Indeed, our systematic indicators have shown that market uncertainty has remained elevated for some time, with concerns about valuations, market concentration, and the AI cycle causing investors persistent discomfort. Ultimately, we do not believe that the election is likely to materially deepen the already high levels of uncertainty. Instead, what is important for us is to be able to identify opportunities within this uncertain backdrop. We believe that following a disciplined and dynamic approach will be crucial in achieving this."

Ned Naylor-Leyland, Investment Manager, Gold & Silver 

"US voters have expressed their unhappiness with the dollar’s loss of purchasing power. The administration has proven unable to get rising prices and the cost of living under control. 

Investors in gold and silver are interested to know whether the mid-term results will affect wider fixed income and equity market pricing.  Financial conditions feel tight. Any sense that asset prices might be hit could ease real rates and put a bid under US dollar-denominated gold and silver spot prices.

In my opinion, the longer-term macro case for monetary debasement remains in place. Debasement refers to the erosion of a currency’s purchasing power. Investors can hedge against it by moving capital out of fiat currencies such as the dollar and into uncorrelated assets such as monetary metals (gold and silver)."

Valerio Angioni, Investment Director, Fixed Income

"Democrats taking both the House and the Senate could make it harder for the current administration to implement its agenda, although the scope for major policy changes would remain limited by the President’s veto.

Control of the Senate could also affect the confirmation of presidential nominees, including appointments to the Federal Reserve. The main near-term focus would likely be negotiations over government funding and the debt ceiling. These could become more difficult and raise the risk of a shutdown or renewed debt-ceiling stress. Any eventual compromise could involve higher spending and leave the deficit wider. There could also be greater scrutiny of AI and data-centre investment, as well as possible changes to tariffs, financial regulation and drug pricing.

The implications for markets are not clear cut. On the one hand new hurdles to AI infrastructure buildout could weigh on stock prices and ultimately economic growth, potentially pushing bond yields lower. On the other hand, renewed fiscal uncertainty around debt ceiling could create additional volatility for Treasuries and especially the long end of the curve."

Andrew Rubins, Investment Analyst, Fixed Income (on the impact on US healthcare credit)

"A Democratic majority in both chambers gives the party greater influence over the policy agenda and the ability to investigate the administration. However, the President’s veto makes material changes to healthcare policy difficult in the near term.

Democrats are likely to focus on restoring or extending enhanced Affordable Care Act (ACA) marketplace subsidies, softening the 2025 Medicaid cuts and requirements, and pursuing further measures on drug pricing and Medicare. They could also use congressional hearings and oversight to scrutinise healthcare agencies and policy implementation.

 Some hospital operators could benefit over time if changes reduce the number of uninsured patients and uncompensated care, particularly those with greater exposure to Medicaid and ACA patients. However, the impact would vary by hospital, and any policy changes would require legislation. Existing measures remain in the pipeline, including Medicaid work requirements from 2027 and the phasing in of limits on state-directed hospital payments from 2028. I would therefore expect little immediate change to the operating outlook, which will continue to depend on existing law, Medicaid decisions and each hospital’s payer mix."

Anton Kyriakides, Investment Analyst (on the impact on solar sector)

"The Democratic wave has been viewed as supportive of clean-energy supply-chain companies, with solar stocks rallying as investors anticipate stronger congressional support and pushback against Trump’s anti-solar policies. The move has coincided with a rotation out of AI-related names, reversing some of the negative sentiment after the OBBB (One Big Beautiful Bill) reduced IRA tax incentives, although it reflects expectations of future support rather than the restoration of credits already removed."