BND Scope: Issue 39 - The U.S. Economy After the Midterms

Democrats gained control of both the Senate and the House of Representatives in the November 3 midterm elections. According to Reuters' November 4 report, Democrats secured at least 54 Senate seats and increased their representation in the House by at least 30 seats. Republicans consequently lost control of both chambers halfway through Trump's second presidential term.

The cost of living, trade policies, and the economic consequences of the war with Iran were prominent issues throughout the election campaign. In particular, the war's impact on energy prices and rising household expenses added to voters' economic concerns. Reuters also identified dissatisfaction over these issues as a factor contributing to the Democratic victory.

Following the elections, Democrats said they would prioritize reducing living costs and strengthening oversight of the Trump administration. However, a change in congressional control does not necessarily translate into an immediate change in economic policy.

The new Congress will take office on January 3, 2027. From that point, Democrats will have greater influence over federal budget negotiations, government spending, and the legislative agenda. Trump, however, will retain his executive powers and the authority to veto legislation passed by Congress.

This new balance of power could make agreements on tax policy and federal spending more difficult. Economic measures requiring congressional approval will likely involve more extensive negotiations. Decisions that fall within the president's executive authority will continue to follow a separate political and legal process.

For businesses, the significance of this shift lies in how political decisions may affect investment plans. Projects dependent on government contracts, federal incentives, or regulatory approvals could face longer decision-making processes. If uncertainty increases, some companies may choose to revise their spending schedules rather than cancel investments altogether.

Nevertheless, it is too early to conclude that the political shift will cause a broad slowdown in private investment. The economic consequences of the new congressional majority will become clearer through upcoming budget negotiations and the policies that ultimately emerge.

Click here to read this content in Turkish.

U.S. stock markets initially rallied following the midterm elections. On November 4, the Dow Jones Industrial Average gained 1,569 points, or approximately 3%. The S&P 500 rose 1.6%, while the Nasdaq advanced 1.4%. Expectations that greater clarity over the election results would reduce political uncertainty, together with falling oil prices, were among the factors supporting the rally.

However, the gains were not evenly distributed across the market. While some major technology stocks advanced, data center operators and certain companies investing in artificial intelligence infrastructure faced selling pressure. Investors also began assessing the possibility that Democratic control of Congress could bring greater regulatory scrutiny to the sector.

On November 5, markets reversed course sharply. The Nasdaq fell 5.5%, the S&P 500 declined 4.4%, and the Dow Jones lost 3.4%. The Nasdaq entered correction territory, having fallen approximately 12% from its October 6 record high. Losses were even steeper among semiconductor companies, with Nvidia shares dropping 9.3% and AMD falling approximately 17.3%.

The selloff cannot be attributed solely to the election results. The financial performance of technology companies, the scale of spending on AI infrastructure, and questions about when these investments will generate sufficient returns also weighed on investor sentiment. In particular, financial results from some semiconductor companies prompted a reassessment of growth expectations across the sector.

Two competing expectations are shaping the outlook for AI investment. On one hand, demand for computing capacity and advanced chips is expected to continue expanding. On the other, investors are questioning how quickly the substantial spending required to meet that demand can translate into revenue and profits.

The possibility of tighter regulations on data center projects under the new Congress has added another consideration. At this stage, however, these concerns relate primarily to potential policy changes rather than regulations that have already taken effect.

The two trading sessions following the election demonstrated that financial markets do not respond to political developments in isolation. Investors are weighing the new balance of power in Congress alongside corporate earnings, financing costs, and expected investment returns. The sharp decline in technology stocks also showed that strong growth expectations do not eliminate concerns about companies' underlying financial performance.

The U.S. midterm elections shifted control of Congress. With Democrats securing majorities in both the Senate and the House of Representatives, new questions have emerged about the direction of President Donald Trump's economic agenda over the next two years. Wall Street initially rallied following the election, only to suffer sharp losses the next day, led by technology stocks. Meanwhile, oil prices fell significantly during the week, while October's employment report exceeded expectations.

These developments present a mixed picture of the U.S. economy. As the political landscape changes, businesses are reassessing regulatory and spending policies alongside energy costs, financing conditions, and consumer demand.

In this 39th issue of BND Scope, we examine the economic implications of the midterm elections, movements in financial markets, developments in energy prices, and the latest signals from the labor market.

A New Balance of Power in Congress

Sharp Swings on Wall Street

Oil Prices See Their Sharpest Weekly Decline in Years

Energy markets also experienced significant movements following the election. Democratic control of Congress reinforced market expectations that political pressure could lead to a reduction in tensions surrounding the war with Iran and potentially allow more oil exports from the region. Combined with a weaker demand outlook, these expectations placed downward pressure on crude prices.

Brent crude fell below $100 per barrel during the week. The January Brent futures contract closed at $98.32 per barrel on November 6, bringing its weekly decline to approximately 17%. According to Reuters, this was Brent's largest weekly percentage drop since the beginning of the COVID-19 pandemic.

The decline was not driven by the election alone. Expectations of increased oil supplies from the Middle East, concerns about global demand, and a partial retreat in the risk premium associated with the war also contributed to lower prices.

Nevertheless, security risks in the region have not disappeared. The course of the war with Iran, developments around the Strait of Hormuz, and the security of international oil shipments remain important factors for energy markets. Indeed, statements concerning possible further military strikes helped support prices during trading on November 6.

For businesses, the effects of falling oil prices vary considerably by industry.

Lower fuel prices could ease cost pressures for airlines, logistics providers, and road transport companies. For energy producers, however, declining prices may weigh on revenue and investment expectations. Changes in energy and petroleum-based raw material costs could also affect production expenses in the chemical and manufacturing sectors.

The benefits of lower oil prices do not always reach businesses immediately. Existing supply contracts, inventory costs, and transportation expenses can influence how quickly market price changes translate into operating costs. Companies that have secured fuel supplies at previously agreed prices, for example, may not benefit from the decline right away.

For this reason, the week's sharp drop in oil prices should not yet be interpreted as a lasting improvement in energy costs. The direction of prices will continue to depend on developments in the war, supply conditions, and the outlook for global demand.

Job Growth Exceeds Expectations

U.S. employment data released on November 6 suggested that the labor market performed better than expected in October. According to the Bureau of Labor Statistics (BLS), nonfarm payrolls increased by 165,000, substantially exceeding economists' expectations of approximately 65,000 new jobs. The unemployment rate declined from 4.2% to 4.1%.

Figures for the previous two months were also revised upward. Combined employment growth in August and September was 84,000 higher than previously reported.

Job gains were concentrated in several industries. Professional and business services added 70,000 jobs, healthcare gained 42,000, transportation and warehousing added approximately 25,000, and manufacturing employment increased by 19,000.

Other reports released during the week also pointed to continued hiring activity. According to ADP's November 4 report, private sector employment increased by 86,000 in October. Meanwhile, the BLS Job Openings and Labor Turnover Survey (JOLTS), published on November 3, showed approximately 7.5 million job openings in September and 5.4 million hires.

However, ADP and BLS figures are calculated using different methodologies. Although both reports point to continued employment growth, their findings differ across industries. For example, BLS reported an increase of 70,000 jobs in professional and business services, while ADP recorded a decline of 27,000 in the same sector. The two datasets should therefore not be treated as directly comparable measures that independently confirm identical trends.

Indicators related to layoffs also did not suggest a broad deterioration in labor market conditions. Initial claims for unemployment benefits fell to 189,000 in the week ending October 31. According to Challenger, Gray & Christmas, companies announced plans to eliminate approximately 44,000 jobs in October, 71% fewer than in the same month a year earlier.

Still, stronger-than-expected job growth does not mean that every labor market indicator is positive.

The number of people working part-time for economic reasons increased by 339,000 in October, reaching 4.8 million. This group includes workers who would prefer full-time employment but have been unable to secure it. As a result, even with a relatively low unemployment rate, some workers continue to struggle to obtain the hours they want.

Wage growth also remains important for the inflation outlook. Average hourly earnings increased 0.4% in October and 3.1% over the previous 12 months. Continued job creation and wage pressures could encourage the Federal Reserve to place greater emphasis on inflation risks when setting interest rates.

Following the employment report, U.S. Treasury yields rose. According to Reuters, the probability assigned by financial markets to a December Fed rate increase climbed from approximately 70% to 78%. This shift in expectations, however, does not mean the Fed has decided to raise rates. Its next decision will depend on inflation figures and broader economic conditions, as well as employment data.

For businesses, these developments create an important distinction. Continued employment growth can support household incomes and consumer demand. At the same time, interest rates remaining elevated or rising further could increase borrowing costs and make new investments more difficult to finance.

The U.S. economy continues to create jobs. Yet whether this translates into a favorable environment for businesses will depend not only on the pace of hiring, but also on inflation and financing costs.

Conclusion

The U.S. midterm elections have changed the political balance in Washington, but they have not fundamentally reshaped the economic outlook on their own. Democratic control of Congress opens the door to a new round of negotiations over federal spending and regulatory policy. The economic impact of this shift, however, will depend on the decisions Congress actually makes.

Sharp movements in financial markets demonstrated that investors are paying close attention to corporate performance and investment costs alongside political developments. The selloff in technology stocks, in particular, highlighted growing questions about the relationship between the scale of AI investment and the returns companies expect to generate.

Lower oil prices could provide cost relief for some industries. Yet the course of the war and continuing risks to energy supplies leave uncertainty over how long those benefits might last. Meanwhile, stronger-than-expected employment figures suggest that the economy retains its capacity to create jobs, while adding pressure to the Federal Reserve's interest rate outlook.

What connects these developments is that businesses are facing several different conditions at the same time.

Lower energy prices may reduce operating expenses for some companies, while higher interest rates can increase financing costs. Strong employment may support consumer spending, but the new political balance could alter the timelines of investments dependent on government policy.

The direction of the U.S. economy in the coming months will not be determined by election results or any single economic report. Congressional decisions, Federal Reserve policy, energy markets, and corporate investment spending will all play a role.

For businesses, the central question remains: As demand continues, how predictable will costs and economic policies remain?

Consulting

Join

info@bnd.consulting

+1 (346) 296 - 8588

© 2026. All rights reserved.

800 Bonaventure Way Ste 116 Sugar Land TX 77479

Privacy Policy