J.P. Morgan’s October 1, 2026, report does not predict a midterm winner. It lays out three possible congressional-control scenarios—Gridlock, Blue Wave and Red Wall—and identifies industries and equity baskets it believes could benefit in each. The distinctions matter: Gridlock is mainly a case for less downside from new policy, Blue Wave is constrained by institutional checks, and Red Wall emphasizes policy continuity, deregulation and investment in AI infrastructure.
What J.P. Morgan means by the three scenarios
The report, titled “Midterm Elections, Scenario Analysis, Baskets,” treats the election as a set of policy possibilities, not a reliable short-term trading signal. Its baskets are groups of securities associated with themes or potential policy beneficiaries; they are not consumer products, guaranteed winners or promises of returns.
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| Scenario | Expected congressional control | Policy channel emphasized | Potential exposures named by the report | Important constraint or risk |
|---|---|---|---|---|
| Gridlock | Congress is split between the parties. | Fewer new federal policy changes could limit policy downside, rather than create a fresh upside catalyst. | Healthcare, defense, civil infrastructure and selected technology. | The administration can still act through executive authority, and agency enforcement can change the policy environment. |
| Blue Wave | Democrats control both chambers. | Funding negotiations, oversight and efforts to preserve or unwind existing policies could shift the policy landscape. | Healthcare and themes linked to the Inflation Reduction Act (IRA), including green, electric-vehicle and climate-related exposures. | A Republican president could veto legislation, and the Senate filibuster remains a barrier to many bills. |
| Red Wall | Republicans retain control of Congress. | Policy continuity, potential fiscal expansion, deregulation and faster federal permitting could support investment and development. | Datacenters, power and grid investment, traditional and nuclear energy, financials, defense and other areas. | The outcome and its implementation are uncertain; market and economic forces can overwhelm or cut across policy effects. |
Why the AI and infrastructure angle stands out
The report’s Red Wall case connects potential policy continuity and faster permitting to the buildout needed for AI: datacenters require power, grid capacity and energy infrastructure. J.P. Morgan also expects AI investment to continue regardless of the election outcome. The report’s authors write: “We expect AI capex momentum to remain intact after the midterms and potentially even strengthen in 2027 and 2028, as companies seek to meet AI demand and advance investment before political risks intensify around the next presidential cycle.”
That is an analyst view about capital spending, not evidence that a particular company, technology stock or basket will outperform. The report also identifies an “agnostic beneficiaries” basket for companies it regards as potentially advantaged across outcomes, alongside a separate government-spending basket. These labels describe equity exposures; they do not establish a return forecast.
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What the report’s historical figures do—and do not—show
J.P. Morgan’s October 1 report cites historical averages and comparisons as context, not as a dependable election trade. It says that across the previous 23 midterm cycles dating back to 1934, the sitting president’s party lost an average of about 27 House seats and 3 Senate seats. That is a retrospective average, not a forecast for the coming midterms.
The report gives two different historical comparisons for gridlock and single-party control, both since 1950. They use different starting points, so the figures should not be combined or treated as interchangeable:
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- Using the report’s election-date comparison over the two-year congressional term, gridlock was associated with a return of +21%, versus +18% for single-party control.
- Using its comparison from the start of a new Congress, gridlock was associated with +25%, versus +18% for single-party control.
The report says historical S&P 500 sector and industry patterns are mixed and have no perfect hit rates. Those return comparisons therefore do not establish that gridlock causes stronger performance or that the pattern will recur. The source material does not define the return calculation further here, so the percentages should be read as the report presents them, with their comparison period attached.
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For context on the political environment, J.P. Morgan’s report recorded Democrats about 8.3 points ahead on the generic congressional ballot across the trackers it cited, and betting-market odds as high as 92% for Democratic control of the House and 63% for the Senate. Those are snapshots reported on October 1, 2026—not current polling estimates, objective probabilities or assurances of the result. They should not be carried forward as live figures.
How to use the playbook without mistaking it for a forecast
The report is most useful as a map of possible policy channels: ask which areas might be exposed under each outcome, and what political or market forces could disrupt that scenario. Its core Gridlock argument is that limiting new policy risk may matter more than creating a new catalyst. Its Blue Wave case acknowledges that control of both chambers does not remove presidential veto power or Senate procedural constraints. Its Red Wall case links continuity and possible deregulation to longer-cycle spending in energy, power and digital infrastructure.
For a technology-focused reader, AI capex is the clearest cross-scenario theme in the report, while datacenters and power infrastructure feature in its Red Wall exposures. But companies’ investment plans, policy implementation, financing conditions and demand all matter independently of who controls Congress. J.P. Morgan’s scenario baskets are conditional ways to frame those possibilities, not instructions to buy securities.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Source and scope
This article summarizes the J.P. Morgan report dated October 1, 2026. Its available text is hosted on a third-party report page; an official J.P. Morgan-hosted version was not established. Business Insider’s October 3, 2026, story by Samuel O’Brient is listed as subscriber-only, so its full article wording is not independently available here. The scenario claims and figures above are attributed to J.P. Morgan’s report rather than presented as independently verified forecasts.
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