Tuesday's midterms handed Democrats control of both chambers of Congress and a wave of governorships, including wins in traditionally red states like Texas, Ohio, Georgia and Iowa. For advisors fielding the inevitable client question, what does this mean for my portfolio, RiverFront Investment Group's1 Chris Konstantinos offers a reassuringly unfashionable answer: not much, and possibly something good.
The Historical Pattern Holds
The outcome itself was never really in doubt. Of the 31 midterm elections since 1902, the president's party has lost House seats in all but four of them, with a median loss of 28 seats, and a 32% presidential approval rating going into Tuesday's vote made a Democratic sweep close to inevitable. What matters more to Konstantinos is what divided government tends to produce afterward: policy stability. Democrats now hold the gavels, he notes, but remain well short of the 60 Senate votes needed to break a filibuster or the two-thirds majority required to override a veto. Fewer sweeping legislative swings mean fewer surprises for businesses mapping out capital spending and hiring, a kind of predictability Konstantinos argues has been scarce.
What Gridlock Cannot Undo
The piece's sharpest contribution is its dismantling of the market's most immediate fear: that a Democratic-led wave of state governments will choke off the AI infrastructure buildout. Konstantinos is careful to separate what Congress can do from what it cannot. A Democratic House can summon hearings, subpoenas and headlines, but it cannot rewrite policy wholesale, since most foreign policy and trade authority sits with the executive branch, which still controls federal permitting for data centers on federal land. He points to the administration's demonstrated willingness to govern around legislative gridlock, leaning on Section 232 and Section 301 trade authorities even after the Supreme Court struck down its IEEPA-based tariffs, and to Executive Order 14318, which offers federal sites and expedited reviews to offset state-level bottlenecks. His conclusion is that state resistance is more likely to shift where and how fast AI infrastructure gets built than whether it gets built at all, and he raises an underappreciated possibility: a slower, more dispersed buildout could extend the investment cycle rather than shorten it, reducing the odds of a boom-then-bust unwind reminiscent of fiber optic cable in the late 1990s. He is careful to flag one real cost of gridlock, a 2027 debt ceiling fight he expects to bring its own brinkmanship.
Earnings and Rates, Not Politics
Konstantinos resets the frame on what actually drives this market: corporate earnings and interest rates, with politics mattering only to the extent it moves those two levers. On that score, the underlying data looks constructive. With Q3 earnings season nearly complete, 82% of S&P 500 companies have topped estimates and blended earnings growth is running near 30% year-over-year, while the 10-year Treasury yield has eased back under 5% after a volatile year. Seasonality adds a tailwind: since 1974, the S&P 500 has averaged a 5.7% gain in the three months after a midterm and 12.4% six months out, and going back to 1950, stocks have risen in the twelve months following every single midterm election, 19 for 19, averaging roughly 18.6%. Ned Davis Research's presidential-cycle work echoes the pattern, showing the third year of a presidential term has historically been the strongest of the four.
The Takeaway for Portfolios
Konstantinos closes without drama. "Divided government has historically meant policy stability, and stability has historically been rewarded," he writes, and RiverFront's positioning is unchanged as a result. His advice to clients is to tune out the post-election noise and keep the focus on earnings, inflation and rates, treating politically driven volatility, like the swings of the past several days, as opportunity rather than cause for retreat.
Five Key Takeaways for Advisors and Investors
1. Midterm outcomes rarely redirect the stock market's broader trend for long, and divided government has a track record of favoring policy stability over upheaval.
2. A Democratic Congress can generate headlines and hearings, but executive authority over trade, tariffs and federal land still gives this administration meaningful levers on AI infrastructure policy.
3. A slower, state-by-state AI buildout may extend the investment cycle rather than threaten it, lowering the risk of a sharp boom-then-bust unwind.
4. Fundamentals, not politics, remain the dominant driver: Q3 earnings beats are running at 82% with growth near 30% year-over-year, and the 10-year Treasury has pulled back under 5%.
5. Post-midterm seasonality has been a consistent tailwind, with stocks higher in every 12-month period following a midterm since 1950.
Footnote:
1 Konstantinos, Chris. "Gridlock Is Good (for Markets)." RiverFront Investment Group, 6 Nov. 2026, www.riverfrontig.com/insights/gridlock-is-good-for-markets/.
