Blue tsunami in midterms increases policy risks for markets

The magnitude of the gains for the Democrats in the midterms does not change too much for the near-term policy outlook, given the party still lacks a filibuster-proof majority in the Senate and President Trump has veto power to block legislation. But the Democrats will now hold Senate seats in many typically red states for the next six years, which increases their chance of being able to enact more sweeping legislative changes if they win the next presidential election. That includes the potential for tax hikes on corporations and high-income individuals as well as regulation that could delay the AI rollout.