Three months on, the longer shot has become the favourite. Much has changed since July:
- Affordability has become the defining issue of the campaign, with petrol above US$4 a gallon, diesel above US$6, 30-year mortgage rates at 7.4% and US CPI back up to 3.7% in September.
- The Fed hiked 25bps to 3.75–4.00% on 16 September, its first hike since 2023. In July we expected the Fed to hold under new Chair Warsh but energy-driven inflation forced its hand.
- The US 10-year yield broke through 5% for the first time since 2007, pulling long-end yields higher globally.
- Democrats have opened a near nine-point lead on the generic congressional ballot, and prediction markets now favour Democratic control of both chambers.
Our recent Trip Insights: The US (October 2026) covered company level detail and on the ground feedback from management meetings. Here we step back to look at the midterms: where the race stands, what each outcome means for US policy and bond yields, how it spills over globally, and what it means for global listed infrastructure (GLI). In short, the bond market matters more to our asset class than the ballot box.
Where the race stands
Midterms have historically been a referendum on the sitting President: the rare exceptions came when approval was above 60%. President Trump’s approval sits in the mid 30s, among the lowest of any President since 1945. Despite Trump’s State of the Union address, where he promised cheaper petrol and lower mortgage rates – he started the Iran War only four days later – delivering the opposite.
Chart – Trump’s approval (LHS) vs petrol prices (RHS)
IMG(Source – TD Cowen, Bloomberg)
Republicans hold the House 219–215, with one vacancy, and the Senate 53–47. Democrats therefore need a net gain of three House seats and four Senate seats; with Vice President Vance holding the tie-breaking vote, a 50–50 Senate would stay Republican.
Table – Senate & House seats; Current vs up for election in 2026
IMG(Source – 4D, Itau, Jefferies, Bloomberg)
Democrats lead the generic ballot by about nine points, the widest for any midterm since at least 2014. Polls have tended to understate Republicans, but even the largest October miss since 2006 (4.6 points) would still leave Democrats four points ahead.
Chart – Democrats generic ballot advantage continues to climb
IMG(Source – 4D, Bloomberg, Real Clear Politics Generic Congressional Vote polling data)
The Senate is the swing variable. Of the 35 seats on the ballot, Republicans are defending 22, but most are in safe, rural states, and Democrats likely need a national lead of at least six points to win the chamber. Democrats must flip four Republican-held seats. North Carolina is their best chance; beyond that, the path runs through Maine, Ohio, Texas, Alaska and Iowa – four of which Trump won by 11–14 points in 2024. Strong candidates have made this plausible: Democrats lead or are level in the polling average in all six, and Kansas and South Carolina have come into play. But outside North Carolina every lead is under five points, and a 2016- or 2024-sized polling miss would give Democrats the House but not the Senate. Democrats must also hold their own seats, including open seats in Michigan, where they lead by just two points, and Minnesota, where their lead is narrowing. Losing either would require a fifth pick-up in a deep-red state.
Chart – Democrats path to 51; North Carolina plus three toss-ups
IMG(Source – 4D, Itau, Jefferies, TD Cowen. 13 October 2026)
Despite still looking very uncertain, prediction markets put the odds of a Democratic sweep at 65% (21 October 2026)
Chart – Democratic sweep (prediction markets)
IMG(Source – 4D, Bloomberg, Kalshi)
Below are our main takeaways on each potential outcome, and policy and fiscal implications.
IMG-Table
What changes – and what doesn’t?
Whatever the result, the White House keeps the levers that matter most. The President retains the veto, and Democrats should be well short of the two thirds majority needed to override it, so tariffs, sanctions, energy and foreign policy remain largely with the executive. A Democratic Congress would govern by investigation rather than legislation – more noise, but few major policy changes.
The exception is the Senate’s power over appointments. Judges, Cabinet members and the commissioners of independent regulators all need Senate confirmation, and a Democratic Senate could block the President’s nominees. That matters for infrastructure: FERC (which approves gas pipelines and LNG terminals and oversees interstate power markets) and the NRC (nuclear) each have two commissioners whose terms expire during the next Congress. A Democratic Senate could force more moderate nominees, or leave seats vacant and slow approvals.
The bigger impact is on fiscal policy. Losing the House alone would end the prospect of a second reconciliation package (the fast-track process used for last year’s One Big Beautiful Bill Act) and turn the 2027 debt ceiling into the key market event, with the limit expected to bind early in the year and the Treasury running out of room around mid-2027. Unified Republican control would put more tax cuts and defence spending back on the table, and with them wider deficits.
Chart – US debt ceiling to be reached in Q1 2027 (USD $b)
IMG(Source – 4D, Bloomberg)
Two debates central to the infrastructure outlook remain live whatever the result;
- Permitting reform. Slow approvals are one of the biggest bottlenecks in the US energy investment cycle – new transmission lines, pipelines and grid connections take years to permit, and longer to clear legal chal-lenges. A bipartisan package that limits litigation under environmental law, curbs state vetoes of projects and expands the federal role in transmission faces its first Senate procedural vote when Congress returns on 9 November. The post-election ‘lame duck’ is the best window in years: much of the bill text already exists, sev-eral key negotiators are leaving, and must-pass bills such as the transport reauthorisation can carry it. Even so, the odds are modest (around 25%), with the administration’s intervention in wind and solar permitting the main sticking point. A deal would be a clear positive for electric utilities, midstream pipelines and US renewables developers; a Republican sweep would weaken the incentive to deal.
- Affordability. Residential power prices are around US$0.185/kWh, against roughly US$0.16 at the same point under President Biden and US$0.13 in Trump’s first term. Both parties are responding: Democrats have proposed making large users pay the full cost of grid connection, and a House Republican draft would shift da-ta centre grid costs away from households. But the decisions that matter sit with the states – 36 governor-ships are on the ballot, and in most states the governor appoints the regulators who set allowed returns. We expect pressure on allowed returns and a shift of costs onto large load customers rather than a halt to in-vestment, which is why we continue to favour states with lower relative bills and constructive regulators.
Yields – how high, and does the election matter?
The US 10 year yield held above 5% for the last month, up from below 4% in February, just before the Iran war. It closed at 5.31% on 5 October, its highest since 2007, and the 30-year has reached 5.60%, its highest since 2004.
Chart – Global ten year yields
IMG(Source- 4D, Bloomberg, 21 October 2026)
This move differs from 2025. Between September 2024 and the end of 2025, the Fed cut rates 175bps while 10-year yields rose 53bps – a rise driven by the ‘term premium’, the extra return investors demand for holding longer-dated bonds. In 2026, the move has been led by the Fed and inflation, with the whole curve shifting higher. Deficits, Treasury supply and AI-related borrowing still matter at the margin. Markets price an 87% chance of a further 25bps Fed hike at the 8–9 December meeting, and around three more hikes by mid-2027, with the implied policy rate peaking near 4.7%
In January we said Trump remained focused on long-term yields and that 5% was a key trigger point. The response has come through energy rather than a policy retreat – with a coordinated G7 release of crude and diesel, and a temporary licence for Russian diesel.
We see the election as a second order driver for bonds. At the margin, a Democratic Congress would be read as a check on deficits and a support for Fed independence, modestly positive for long bonds; unified Republican control would point the other way. We expect yields to stay elevated and volatile, with modest relief rather than a reversal under a Democratic sweep.