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The upcoming 2026 midterm election cycle poses a challenging environment for the ruling Republican majority.
According to an analysis of Washington politics by Raymond James managing director Ed Mills, "affordability of goods and services tops many policy issues for American voters" as the elections approach. Although the legislative and executive branches have taken targeted measures to curb rising prices, the turmoil caused by key administration policy decisions—particularly tariffs and the ongoing war with Iran—continues to negatively impact voter sentiment.
Mills notes that the mounting economic and geopolitical pressures are directly reflected in the president's declining approval rating. At the time of writing, President Trump's approval rating stands at 38%, and the analysis emphasizes that "such a low approval rating almost always translates into losses in at least one chamber of Congress" during the midterm elections. Data dating back to 1982 shows that presidential approval ratings rarely improve significantly between five months before an election and Election Day itself, almost invariably resulting in a loss of at least one chamber.
The national climate is currently creating significant legislative tailwinds for the Democratic Party, which is building on the momentum gained in the special elections. In the overall congressional preference poll, the opposition holds a 7.6% advantage. While a number of active redistricting campaigns in the middle of the decade could limit the absolute net gain, Mills' analysis places an 85% cumulative probability that the opposition will successfully recapture the House.
Unlike the volatile House race, Mills predicts that the Senate race will remain significantly more stable thanks to the inherent advantages of the defensible seat map. Historically, the results of Senate midterm elections maintain a close statistical correlation with the results of the preceding presidential election in each individual state. With seven of the nine key battleground states voting Republican in the 2024 cycle, the opposition faces a steep mathematical uphill climb to change the balance of power.
To help institutional investors navigate the changing legislative landscape, the analysis outlines three baseline scenarios for Washington's post-election structure. The company estimates the probability of the baseline scenario—a Democratic House and a Republican Senate, or a divided government—at 50%. Mills warned that "a divided government with a Democratic House may not resemble past divided governments," pointing to the likely increased risk of budget paralysis, as a Republican Senate continues to advance judicial appointments.
The alternative scenarios carry different regulatory implications for capital markets for the remainder of the presidential term. A Democratic victory in both chambers is estimated at a 35% probability and will likely freeze the administration's tax initiatives in favor of stronger corporate oversight. Meanwhile, the probability of maintaining the status quo—Republicans retaining control of both chambers—is 15%. According to Mills, this will accelerate the passage of budget reconciliation packages, expansion of domestic energy, and stricter trade regulations.