The upcoming US midterm elections could significantly alter the relationship between corporate America and the federal government, potentially changing the regulatory and financial outlook for major companies across several industries.
A Democratic victory in either or both chambers of Congress could give the party greater authority to investigate businesses, scrutinise federal spending and demand changes to legislation. However, President Donald Trump would retain significant executive powers, including control over tariffs, immigration and federal regulations.
Historically, financial markets have performed relatively well under divided government. According to a Morgan Stanley analysis, the S&P 500 has delivered an average gain of 23% in the year following midterm elections when a Republican president faced a divided Congress. This compares with an average increase of 16% when Democrats controlled both chambers.
Analysts attribute this trend partly to legislative gridlock, which can prevent major policy changes. However, some experts caution that historical market performance does not guarantee a similar outcome this time.
“We don’t think that blueprint holds up this time around, and we still see plenty of reasons to be constructive on the U.S. equity market,” said Ariana Salvatore, head of U.S. public policy research at Morgan Stanley, according to CNBC.
For investors, the elections could have important implications for companies operating in defence, healthcare, banking, cryptocurrency and artificial intelligence.
Congressional investigations could increase corporate scrutiny
A Democratic victory in either chamber would give the party control of congressional committees, along with greater authority to issue subpoenas, demand corporate documents and summon business executives for public hearings.
Democratic Senator Richard Blumenthal has already sought information from companies that contributed to Trump’s proposed White House ballroom project. The companies include Cisco, Salesforce, ServiceNow and cryptocurrency exchange Kraken.
According to documents obtained by The Washington Post, Apple and Nvidia each pledged $25 million towards the project. A Democratic-controlled Congress could expand scrutiny of corporate contributions and relationships with the administration.
Healthcare companies face funding uncertainty
Healthcare is another sector that could face significant political changes.
Trump’s 2025 tax and spending legislation, known as the One Big Beautiful Bill, is projected to reduce federal Medicaid spending by $911 billion through 2034, according to a KFF analysis of Congressional Budget Office estimates.
New Medicaid work requirements are scheduled to take effect from January 1, 2027, or earlier in some states. Reduced federal funding could put additional pressure on hospitals, healthcare providers and state budgets.
Although Democrats would not be able to repeal the legislation independently, they could seek funding changes or delays through budget negotiations.
Healthcare insurers, hospitals and pharmaceutical companies could also face greater scrutiny over treatment costs, insurance coverage and corporate profits.
Defence contractors face spending debates
The defence industry could experience changes in funding priorities. The Trump administration has requested $1.5 trillion for national defence in fiscal 2027, focusing on weapons replenishment, military readiness and other strategic requirements.
The administration has also sought an additional $87.6 billion for fiscal 2026, primarily linked to military operations involving Iran.
A Democratic-controlled Congress could challenge certain Iran- and Israel-related expenditures while advocating greater assistance to Ukraine. However, bipartisan support for deterring China, nuclear modernisation and missile defence could protect several major defence programmes.
Cryptocurrency industry seeks regulatory certainty
Cryptocurrency companies are also watching the elections closely.
The industry’s efforts to establish long-term regulatory clarity suffered a setback in September when the Senate failed to advance the Trump-backed Clarity Act.
Democratic gains could increase pressure for stronger consumer protections, restrictions on yield-bearing stablecoins and closer examination of Trump’s cryptocurrency-related business interests.
Consequently, negotiations over a comprehensive crypto regulatory framework could become more complicated.
AI infrastructure faces growing political opposition
Artificial intelligence could emerge as one of the most contentious issues.
Trump has prioritised rapid data centre development, viewing it as essential to economic competitiveness and national security. Meanwhile, major technology companies, including Microsoft, Amazon, Alphabet and Meta, are expected by Morgan Stanley to spend more than $1 trillion on capital projects in 2027.
However, concerns over electricity bills, water consumption and infrastructure expenses are generating public opposition.
Congress has already debated legislation requiring large data centres to cover additional electricity infrastructure costs. A Democratic victory could strengthen demands for stricter requirements, potentially increasing operating and construction expenses for technology companies.
Ultimately, the midterm elections could determine how much influence corporate America retains in Washington and whether major industries face tighter oversight, changing spending priorities and additional regulatory costs.
