The Democrats’ unexpectedly large victory in this week’s US midterm elections has changed the playing field, both politically and in the markets. President Donald Trump now faces a Congress controlled by his political opponents.
“The market hopes for better opportunities to de-escalate the conflict with Iran and for the Strait of Hormuz to reopen (which would push oil prices down). It also hopes for more responsible fiscal policy, with a clearer plan for reducing budget deficits (which would push bond yields down),” Niklas Wellfeldt, deputy head of equities at the Bank of Åland, writes in a comment to TT.
SEB strategist Esbjörn Lundevall believes the election result could be a marginal negative for AI data centres and defence stocks such as Norway’s Kongsberg and Sweden’s Saab, but positive for renewable energy companies such as Denmark’s Vestas and Ørsted.
“The big question, of course, is whether we can find a solution to the war in Iran. That could give the stock market a very positive boost if the prices of natural gas and refined oil products plummet,” he writes.
“Maintain a high equity exposure”
Mattias Isakson, head of equity strategy at Swedbank, expects Democratic control of Congress to bring budget discipline in the US, although there may also be some question marks over AI investments there.
“Maintain a high equity exposure, balanced to the desired risk level,” is his conclusion.
But he is unsure how AI stocks in the US will be affected.
“Hopefully, we will see a broadening of market strength,” he writes in a comment to TT.
AI giant Anthropic, which is preparing to list on Wall Street, is seen by Isakson as an exciting but difficult-to-value company whose stock could become “volatile” (unpredictable). According to Wellfeldt, a successful listing is “extremely important for risk appetite around AI.”
“The stock could be an explosive cocktail, with potentially large movements both up and down,” he writes.
The Stockholm Stock Exchange could continue to rise after gaining 11 percent so far this year, according to Isakson.
“Stocks are a winter sport”
Wellfeldt agrees:
“Stocks are a winter sport, and valuations are appealing. If risk appetite remains strong, the stock market is likely to rise significantly, perhaps another 5 percent, in the latter part of 2026,” he writes.
Both also believe the S&P 500 on Wall Street could rise further, having gained 12 percent so far this year.
What do you think?