Source: Sharecast
In a contest dominated by the spiralling cost of living - in large part attributable to the US president’s decision to go to war with Iran - the Democratic landslide has ended Republican control of both chambers, with majorities secured in the House of Representatives and Senate.
There were also a number of historic wins. In Michigan, Abdul El-Sayed became America’s first Muslim senator, Georgia’s Keisha Lance Bottoms became the first black female governor, and James Talarico became the first Democrat to win the Texas Senate seat since 1988.
Trump appeared to accept the result, even telling Fox News that the Democrats "did a good job". But he also posted on social media: "I wasn’t on the Ballot and if I was, we would have won IN A LANDSLIDE!”, as well as a picture of a red baseball cap with the word "Veto" on it. The president had already warned he would block legislation in the event of the Republicans losing control of the Senate, and told Fox News on Wednesday: "After a couple of months of vetoes, they’ll call and they’ll say, ‘how do we get this stuff done?’. And we’ll work together. I have the power to veto."
On Wall Street, futures initially fell before rising, as investors weighed up what the so-called blue tsunami would mean for the economy and wider political landscape. Both the S&P 500 and the Dow were called to open higher.
ING said: "The baseline case was a Democrat win, but the scale of the victory will give markets plenty to digest.
"A decisive victory helps ensure a smooth process, as there is little risk of the result being challenged.
"On the other hand, we should also place the Democrats’ victory in the context of the current AI jitters in equity markets. Data centres have been a big topic in these elections, with the Democrats taking a firmer stance against the free market approach given to the sector by the government."
Russ Mould, investment director at AJ Bell, said: "Theoretically, a divided government can create gridlock for policy changes, but there is a school of thought that Democrats may prioritise pushing through AI regulation.
"Given that AI has been the key to considerable stock market wealth creation in recent years, the prospect of red tape could put the brakes on this hot investment theme. However, a positive market reaction implies that certain investors are welcoming the potential that Trump’s political power may be curbed somewhat."
Safe-haven gold spiked on the results, but Brent crude shed 1% at $102.79 a barrel. West Texas Intermediate was broadly unchanged at $95.90. US Treasuries rallied, pushing yields lower, on expectations that the Democrats could be able to rein in Trump’s spending. The dollar was also lower against a number of other currencies.
Rabobank said: "Trump’s executive powers still extend over foreign policy, trade and immigration. The Democratic-controlled Congress can be expected to try and exert some influence over the president’s decisions by negotiating on fiscal issues. However, for the inflation outlook the oil price remains centre stage. This implies that what Trump decides to do next regarding the war in Iran remains a core issue."
But Neil Wilson, UK investor strategist at Saxo, said the "clean sweep leaves Trump a lame duck for the remaining two years of his administration".