Source: Federal Reserve Economic Data and history.house.gov.
For investors, the policy outlook points more to sector-level effects than broad market shifts. Tariffs remain a source of uncertainty, as ongoing investigations could lead to new or expanded duties. Continued deregulation may be a tailwind for energy and financial services, and the lack of consensus on artificial intelligence (AI) makes broad regulation less likely. Meanwhile, voters made clear that affordability is a top priority, leaving healthcare and housing as key areas for policy to address.
For now, markets can set election uncertainty aside, even as attention turns to the 2028 race, which could shift the status quo in Washington again.
The 119th Congress has work to finish
Without a deal by December 11, government funding will lapse and the NDAA will expire. Many outgoing members may not want to return to Washington for votes, and post-election tensions could derail both efforts. There is a real risk that neither funding nor the NDAA gets done, but there will also be pressure to clear the decks before January. Further complicating matters, the Republican Senate majority will narrow in December, when Senator-elect Sherrod Brown (D-Ohio) is seated early after winning a special election for an appointed seat.
The 120th Congress’s agenda
In the next Congress, affordability will be a major priority for both parties, especially as they begin positioning for the 2028 presidential race. While each will hope to gain an edge here, there could be some bipartisan efforts on issues like healthcare and housing costs. The president may also be open to signing some legislation as he weighs his legacy.
Pressure is also building to address AI and data centers. Any efforts here are a concern for investors, given how much recent market performance has been driven by the AI trade. Still, consensus on AI has been hard to reach in Washington, making targeted actions on AI safety or data center energy use more likely than broad regulation.
The next Congress will also need to extend government funding and raise the debt ceiling before the Treasury runs out of borrowing room, expected in mid-to-late 2027. Both typically require 60 Senate votes to overcome a filibuster, and negotiations among Congressional Republicans, Democrats, and the White House could cause delays. While debt ceiling brinkmanship once rattled markets, investors have come to expect these disputes to be resolved.
The Democrat-led House is likely to focus heavily on investigations and oversight of the Trump administration and its agenda, leading to high-profile hearings. This could curb administration actions in areas that draw public scrutiny, but it is unlikely to stop them entirely, particularly in policy areas that are high conviction for the administration. The Senate majority also controls confirmations of judges, agency heads, and financial regulators, which could slow or reshape the administration’s nominations.
The White House’s options
With Democrats controlling Congress, and the president focused on his legacy in his final two years, he is expected to continue using executive orders, especially for his signature priorities. President Trump signed more executive orders in the first half of his second term than in his entire first term. Presidents have relied increasingly on executive orders in recent terms, partly because slim or opposing majorities in Congress make legislating difficult.
The administration’s deregulatory agenda has also picked up in recent months, particularly in energy, the environment, and financial services. Expect this to continue, likely peaking in 2027 as regulators work to finalize rules before the Congressional Review Act lookback window opens in 2028. That window makes it easier for a future Congress to repeal rules finalized late in a presidential term.
