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J.P. Morgan’s October 1, 2026, report maps possible investments to three U.S. midterm outcomes: Gridlock, Blue Wave, and Red Wall. It does not predict which outcome will occur or promise that the securities in its baskets will gain. Its central distinction is how each result could change policy risk, government spending, and the industries positioned to respond.
What J.P. Morgan’s playbook is—and is not
The report, titled “Midterm Elections, Scenario Analysis, Baskets,” is an equity scenario analysis. It names groups of securities, or baskets, that its analysts believe could be exposed to different policy outcomes. Those labels are investment-exposure concepts, not consumer products, and the report does not establish that a basket or any individual security will outperform.
The report’s text is available on a third-party-hosted report page rather than an official J.P. Morgan page. Business Insider’s October 3, 2026, listing for Samuel O’Brient’s related story identifies it as subscriber-only. The claims below are therefore attributed to J.P. Morgan’s October 1 report.
How the three scenarios differ
| Scenario | Congressional outcome | Policy channel and market logic | Areas J.P. Morgan flags | Important constraints |
|---|---|---|---|---|
| Gridlock | Congress is split between parties. | Fewer new federal policy changes could mean less downside risk from legislation. J.P. Morgan says the benefit would be chiefly defensive, not a fresh source of market upside. | Healthcare, defense, civil infrastructure, and selected technology. | Executive action and agency enforcement can still affect companies, even when Congress is divided. |
| Blue Wave | Democrats control both chambers. | Funding negotiations, congressional oversight, and attempts to preserve or unwind existing policies could shift the policy landscape. | Healthcare and Inflation Reduction Act-related green, electric-vehicle, and climate themes. | A Republican president could veto legislation, and the Senate filibuster would constrain what can pass. Control of both chambers alone would not guarantee enactment of an ambitious agenda. |
| Red Wall | Republicans retain Congress. | Policy continuity, possible fiscal expansion, deregulation, and faster federal permitting could support investment in AI and infrastructure buildout. | Datacenters; power and grid investment; traditional and nuclear energy; financials; and defense. | The outcome would not remove policy, market, or macroeconomic uncertainty, and a supportive policy direction would not by itself ensure gains for exposed companies. |
J.P. Morgan’s framing is asymmetric: Gridlock is primarily a reduction in potential policy downside, Blue Wave is a route to policy change bounded by institutional checks, and Red Wall emphasizes continuity and deregulation. The report’s authors put the Gridlock case this way: “We think a split Congress would benefit the market primarily through limited downside policy risk rather than creating a new upside catalyst.”
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Two additional baskets span outcomes or spending
Agnostic beneficiaries
The report also identifies an “agnostic beneficiaries” basket for companies it considers capable of benefiting across more than one election outcome. “Agnostic” describes the basket’s intended scenario exposure; it does not mean the companies are insulated from elections, economic conditions, valuation changes, or business-specific risks.
Government spending
A separate government-spending basket focuses on companies connected to public expenditure. Its inclusion reflects spending as a potential investment theme, not a guarantee that a particular budget, appropriation, or contract will be approved.
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What the report’s historical figures can—and cannot—show
J.P. Morgan reports that, across the 23 midterm cycles since 1934, the sitting president’s party lost an average of about 27 House seats and 3 Senate seats. That is a historical average, not a forecast for the 2026 election or a guide to the size of any particular party’s future losses.
For market history, the report presents two comparisons since 1950. In its comparison measured from election dates across the two-year congressional term, gridlock was associated with a reported gain of 21%, versus 18% under single-party control. In a separate comparison measured from the start of the new Congress, it reports 25% for gridlock versus 18% for single-party control. These are different start-date definitions; they should not be combined or treated as a controlled estimate of what election outcomes cause. The report also says its S&P 500 sector and industry histories are mixed and do not have perfect hit rates.
J.P. Morgan’s broader point is that historical patterns do not turn these baskets into reliable election trades. Policy outcomes can cross scenario lines, and the report says it expects AI capital-expenditure momentum to remain intact after the midterms and potentially strengthen in 2027 and 2028 as companies invest to meet demand and move ahead of political risks around the next presidential cycle. That is an attributed expectation, not a certainty or a performance forecast for AI-related stocks.
Polling and betting odds are dated snapshots
The October 1 report cited Democrats as leading the generic congressional ballot by about 8.3 points across the trackers it referenced. It also reported betting-market odds as high as 92% for Democratic control of the House and 63% for the Senate. These figures describe the report’s contemporaneous snapshot, not current polling, a J.P. Morgan forecast, or a guarantee of the result.
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How an individual investor can use the scenarios
For a personal-finance reader, the useful question is not which basket to buy on the assumption that one party will win. It is whether an election-driven thesis fits a financial plan that already accounts for time horizon, risk tolerance, diversification, and the possibility that policy or markets move differently than expected.
- Separate a scenario from a prediction. The three cases help organize possible policy channels; they do not assign a winning outcome or establish the odds of one.
- Check what an exposure actually owns. A basket label such as “AI,” “healthcare,” or “government spending” does not reveal each security’s valuation, revenue sources, or sensitivity to other forces.
- Do not read historical averages as a trade signal. The report’s return comparisons use distinct measurement dates, while its sector histories are mixed.
- Account for forces outside Congress. Presidential authority, agency enforcement, Senate procedure, business investment, and broader market conditions can all affect results.
- Avoid treating a possible beneficiary as a guaranteed winner. The report describes potential exposure, not promised returns for a basket or company.
As one example, a company tied to datacenter construction might fit the report’s Red Wall discussion, but its prospects could also depend on electricity supply, financing costs, customer demand, and execution. The scenario label alone cannot resolve those questions.
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