On November 3, 2026, a “Blue Wave” swept across the nation as the Democrats took control of both the House and the Senate in the midterm elections. The 2026 stock market has shown strong performance with the S&P 500 up 11.8%, Nasdaq up 15.6% and the Dow Jones up 5.9% through the end of September. Will the change in congressional leadership also mean a change for the market performance? If so, why?

Two days after the midterm elections, on Nov. 5, 2026, the S&P 500 fell 335 points, the Nasdaq dropped 1422 points, and the DOW plunged 1833 points. All three major stock indexes had their worst day since April 2025.  The 1422 point decline in Nasdaq is the largest decline in its 55 year history. 

This fall is reflective of investors' concerns about Democratic legislation and AI buildout. Data centers and AI stocks have fueled the market over the past few years. Investors are bracing for the newly elected Democrats to enact legislation to curb data centers and AI buildout. Democratic candidates have flipped five Republican governorships, three of which, Texas, Georgia and Ohio, were states paramount to the AI data center buildout. For example, the Texas governor-elected, Gina Hinojosa, has pledged to halt new data center projects in one of the fastest growing markets for server warehouses worth billions of dollars.

President Trump responded to the Nov. 5th crash by blaming the Americans for how they voted in the elections. In his post on Truth Social, he stated, "The Stock Market crashed today because the Dumocrats had a big Tuesday — So sad to see, you only have yourselves to blame!" Additionally in a separate post he stated that he was "100% in favor" of what his administration calls "Super Intelligence." He added that he would work with states that welcome its development, describing the technology as "gold." Finally, Morgan Stanley said the election results could create delays and tougher restrictions for data-center projects, particularly at the state level, while maintaining that the broader AI capital-expenditure cycle remained intact.

History says that what happened on Nov. 5th is likely a taste of what is to come. The S&P 500 has added 23% since President Trump returned to the White House in January 2025. That represents an annual return of 12.1%. But statistics suggest that the index will deliver worse returns through the remainder of Trump’s presidency. According to Carmen Investment Research, a Republican president paired with a Democratic -controlled Congress has historically been the worst combination for the S&P 500. Historically, under this combination, the S&P 500 has returned 4.9% annually. So if history repeats itself, the S&P 500 will add 4.9% annually during the last two years of Trump’s presidency. That equates to a total return of roughly 10%, which falls well short of the 23% return observed during the first two years of his second term. 

Will history repeat itself? Will President Trump pull a rabbit out of his hat and keep the market on the strong trajectory that it has been on? This remains yet to be seen and only time will tell. 

Tickers to consider:    PPCB, ATLX, BMNR, GLND, SOAR, FLYX, SCNX

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