FaXing looks ahead to the US midterm elections: the Democratic Party is expected to win the House of Representatives and the Senate, and the victory or loss of both parties is difficult to predict, and the results are more important

The Zhitong Finance App learned that according to Société Générale's latest election model, the Democratic Party is expected to win control of the House of Representatives in the November midterm elections, yet the Senate dispute is still evenly divided, making it difficult to predict the outcome. According to this model, the probability that the Democratic Party will win both houses of the Senate and the House of Representatives at the same time is 44%; the probability that the Democratic Party will control the House of Representatives and the Republican Party will control the Senate is 43.3%; the remaining probability mainly reflects the possibility that the Republican Party will maintain full control of both houses.

According to reports, all 435 seats in the House of Representatives and 35 seats in the Senate will be re-elected on November 3. The Republican Party currently has an advantage of 218 seats to 214 seats in the House of Representatives, which means that the Democratic Party needs a net increase of 3 seats. In the Senate, the Republican Party has a majority of 53 seats to 47, and the Democratic Party needs 4 more seats because the vice president can cast a tiebreaker in a 50-50 draw.

The difficult layout of the Senate

Although the US political environment showed a trend similar to a “blue wave (meaning that the Democratic Party won a large-scale victory in the election),” the Senate election map provided some protection for the Republican Party. The Democratic Party must compete in several states that favor the Republican Party in recent presidential elections.

Société Générale's model focuses on nine highly competitive campaigns: Alaska, Georgia, Iowa, Maine, Michigan, New Hampshire, North Carolina, Ohio, and Texas. The model combines analyst ratings, polls, and prices predicted by Kalshi and Polymarket, and also uses simulations based on historical poll errors. As election day approaches, the weight of public opinion polls will rise, and the influence of predicting the market depends in part on contract liquidity. This approach provides a more cautious outlook than the gaming market, which is currently optimistic about the four seats needed by the Democratic Party to gain control of the Senate.

Recent US polls show that the Democratic Party is gaining momentum. According to the results of a poll released on September 14, the US Republican Party's approval rating lags behind the Democratic Party by 7 percentage points, and the prospects for the midterm elections are not optimistic. The poll lasted 4 days and involved 1,143 American adults. When asked who they would vote for if the US congressional midterm elections were held immediately, 44% of respondents would support Democratic congressional candidates and 37% would support Republican candidates. The difference between the two was 7 percentage points. This is the biggest gap in approval ratings between the two parties in the results of this poll since January 2025.

Texas and Alaska became key battlefields

Texas is becoming one of the nation's most expensive Senate elections. Republican groups have pledged more than $50 million to support Ken Paxton's competition with Democratic candidate James Talarico.

Recent polls show that the competition between the two is very tight, and some polls even show that Ken Paxton is in a backward position. Voters' concerns about the affordability of living and US President Trump's support among Hispanic voters have helped the Democratic Party stay competitive.

Compared to Société Générale's model, the forecast market is more optimistic about James Talarico's chances of winning the election. The bank's model framework will reduce the weight of earlier polls, while market prices will respond more quickly to recent polls and investor sentiment.

Alaska has also become an unexpected battleground. Former Democratic Representative Mary Peltola is challenging Republican Senator Dan Sullivan, and the last time the Democratic Party won a Senate election in the state was 2008. Recent polls in the state show that this is a fiercely contested election. Additionally, another candidate, also known as Dan Sullivan, may cause confusion under Alaska's ranked choice voting system.

Why election results matter to investors

Either of the two most likely outcomes would limit the Trump administration's fiscal agenda. The Democratic Party's control of the House of Representatives is likely to increase supervision and make negotiations over spending bills and debt ceilings more difficult. If the Democratic Party sweeps both houses, government financing will face greater uncertainty, and the risk of a government shutdown will also increase. It could also complicate the confirmation process for Federal Reserve officials, federal judges, and any potential Supreme Court justice nominees. By contrast, if Republicans control the Senate and Democrats control the House of Representatives, the Trump administration will still retain the ability to confirm nominees. Trade policy will also generally continue to be controlled by the executive branch.

As a result, for investors, the results of the Senate election may be more important than the market generally expected a change of hands in the House of Representatives. It will affect the Federal Reserve's personnel arrangements, the direction of fiscal policy, and the severity of potential government financing disputes. At the same time, this result could also affect market expectations about tariffs, regulation, and government borrowing.

Affordability of living is still the dominant issue

Jan Groen, US chief economist at Société Générale, pointed out that energy costs, tariffs, artificial intelligence, and data centers are the main topics that may determine the election results the most. Fuel prices fluctuated sharply after the Middle East conflict, increasing household spending and fueling concerns about inflation. Trade tensions between the US and Canada are once again heating up, driving up the costs of consumer goods, industrial products, and agricultural inputs. The AI investment boom has boosted construction activities and capital expenditure. However, the rapid expansion of data centers has become a political issue as their growing demand for electricity is putting pressure on utility bills and grids.

Polls have found that voters trust the Democratic Party more on topics such as health care, fiscal deficits, cost of living, the economy, immigration, and foreign policy. The Republican Party, on the other hand, has a weak advantage on AI issues. Société Générale plans to update its election model every week before the midterm elections. Currently, the core conclusion of this model is that the Democratic Party is likely to control the House of Representatives, but control of the Senate is still evenly divided.