Various forecasts are emerging regarding the direction of the New York Stock Exchange following the U.S. midterm elections. Historically, stock prices have tended to rise after elections as policy uncertainty diminishes. However, this year, the issue of artificial intelligence (AI) regulation has emerged as a new variable.
According to investment bank JP Morgan Chase, the S&P 500 index, a key benchmark for U.S. stocks, has risen in the 12 months following every midterm election since 1950, with an average increase of about 15%.
Jordan Jackson, a global market strategist at JP Morgan Chase, noted in a report, "Given strong corporate earnings, steady economic growth, increased investment, and a less aggressive stance from the Federal Reserve, we may see a repeat of past trends this time as well."
However, the emergence of AI as a variable complicates matters. Bloomberg reports that conflicts surrounding the construction of AI data centers are provoking backlash from voters, regardless of political affiliation, suggesting that the direction of related regulations will be a significant factor for investors.
If the Democrats gain control of both the House and Senate, there is a possibility they may pursue measures to restrict data center construction or impose regulations on AI model development. This could place pressure on the growth prospects of AI-related companies that have driven the stock market's bullish trend in recent years.
Nonetheless, even if the Democrats become the majority party in Congress, implementing AI-related legislation is expected to be challenging. Former President Donald Trump, who has actively promoted the growth of the AI industry, could veto regulatory bills. Bloomberg suggests that it will be virtually impossible for the Democrats to secure the two-thirds majority needed in both chambers to override a veto.
Another scenario is that the Democrats control only one chamber of Congress. In this case, a political stalemate could hinder major legislative initiatives. Bloomberg argues that with the likelihood of drastic policy changes decreasing, investors may find greater predictability in policies, which could positively impact the stock market.
Data compiled by Carson Investment Research indicates that since 1950, the average annual return for U.S. stocks has been 13.7% when a Republican president faced a divided Congress. This is higher than the 8.3% return when Republicans controlled Congress and the 4.9% return under Democratic control.
Considering the significant increase in corporate profits and steady growth in U.S. GDP this year, some analysts believe that a stalemate could be favorable for the stock market.
However, Trump's policy actions remain a variable. Bloomberg points out that Trump's tariff policies and foreign military and diplomatic interventions have caused significant market volatility without direct congressional involvement.
* This article has been translated by AI.
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