*as of 11/4; Sources: S&P, BTC, FTSE, DJRE, GOLD

The U.S. midterm elections ended in a stunning victory for the Democratic Party, which retook control of both the House and Senate, scoring surprising wins across the country. While the Democrats were favored to win back Congress, the magnitude of the victory was unexpected. There will be significant consequences across the economy, both nationally and globally, across every sector. The two biggest factors that led to the election results seemed to be the unpopularity of the Iran War and persistent inflation caused by war and tariffs. Equity markets reacted favorably to the results, with the S&P 500 rising 1.6% and the Dow jumping 3%. Crypto markets also rose around 3% overall.

➨ TAKEAWAY: The favorable market reaction was a sign that investors are tiring of the uncertainty that Trump cultivates, and are more optimistic that a Democratic Congress can bring the Iran War to a close and push back on Trump’s trade policy. The optimism is not evenly spread across every sector, with real estate and renewables stocks surging, but AI-related companies struggling. There will likely be a fair amount of volatility through the end of the year as traders get a handle on what will transpire in the wake of Tuesday’s results.

🎰 Prediction market success: While viewers of election coverage had to wait until late in the night for races to be called, anyone following on prediction markets knew early on that a blue tsunami was coming. Kalshi's prediction markets correctly picked the winner in 479 of 487 resolved races and identified Democratic control of both chambers hours before traditional news networks. Trading volume on the platform nearly doubled versus the 2024 election, an impressive result given the traditional decline in interest in midterm elections compared to presidential elections.

🏡 Real estate policy: Candidates supported by the Realtors PAC won at least 325 races nationwide, and real estate investors are hopeful that this election could eventually lead to lower interest rates. New Democratic legislatures at both the state and federal level will look to increase housing affordability by spurring development across the country, which would lead to greater supply.

🤖 AI in the spotlight: Expect Democrats to prioritize AI regulation as soon as they take control of Congress in January, as the industry’s unpopularity was a major issue in the midterms. AI-related companies will face greater political pressure to slow down development and follow safety protocols, create better privacy protections for customers and children, and face stronger export controls.

🏢 Impact on CRE: Generally, election results have a relatively small impact on the commercial real estate market, given the long-term outlook investors generally take in the sector. This will likely be the case here, particularly with a divided government that will limit the ability of legislation to pass. However, if the Iran war can be resolved and interest rates eventually come down, that will be a significant boost for the asset class.

🪙 Crypto’s muted influence: The crypto industry's Fairshake PAC lost badly on Tuesday after spending $56 million to defeat Ohio’s Sherrod Brown, who won his Senate race easily. This does not bode well for the industry’s future political influence, and its strategy supporting Republican candidates could now backfire. Democrats’ takeover of Congress means crypto-friendly regulations will likely not make it into federal law, and more restrictive guardrails could be in store. Still, the crypto market reacted favorably to the results as a more stable economy is good for everyone.

🚀 Venture is a blue state game: With Texas and Ohio electing Democratic senators and governors, only around $8.6 billion in startup funding has gone to red states in 2026, while purely blue states attracted more than $481 billion.

Perhaps the biggest immediate effect from the midterms will be on data centers, which will see development slow down considerably after Americans overwhelming voted to restrict future construction projects. Nearly 40 cities across nine states voted to either ban or restrict data centers, and Democrats will likely pursue tougher data center regulations in Congress. Governors-elect in Texas, Ohio, and Georgia, have promised data center construction moratoria, meaning that nearly half of all current construction projects are at risk. The incredible growth that the AI industry has seen over the past two years could come to a screeching halt, but it could also make existing data centers even more valuable.