US Midterms 2026: Politics in Focus, Markets in Sight

A Political Turning Point with Limited Market Impact

The midterm elections are widely seen as an important test of support for the US administration. For investors, the key consideration is how the composition of Congress may affect the government's scope for action in the years ahead. As a result, topics such as fiscal policy, regulation and trade relations are likely to receive increased attention around election day.

Historically, financial markets have often experienced higher volatility in the run-up to midterm elections. However, as greater clarity emerges regarding the future political balance of power, uncertainty tends to decline.

Fundamentals Remain Key

Despite the attention political events attract, the long-term outlook for financial markets continues to be driven primarily by economic fundamentals. Corporate earnings, inflation, economic growth and US Federal Reserve policy remain the key factors influencing capital markets.

A potential political gridlock in Washington is not necessarily viewed negatively by market participants. In such an environment, significant changes to taxation, regulation or government spending may become more difficult to implement, potentially providing greater predictability for investors.

AI Infrastructure as a Strategic Investment Theme

Alongside the political debate, the expansion of AI infrastructure is attracting increasing attention. Investments in data centres, energy supply and digital infrastructure are considered essential for the continued adoption of artificial intelligence applications. Regardless of the election outcome, this theme is expected to remain highly relevant for both the US economy and capital markets.

The Momentum USA Strategy

Against this backdrop, the Momentum USA Strategy follows a systematic and rules-based approach to identify US companies demonstrating above-average relative strength. The selection process is based on clearly defined criteria and is reviewed regularly to reflect prevailing market trends.

The approach is complemented by an integrated risk management framework. During periods of elevated market volatility, tactical short positions in US equity index futures may be implemented to partially reduce market risk. The strategy therefore combines participation in prevailing market trends with a rules-based risk management approach.

The Momentum USA Strategy provides rules-based exposure to selected US equities and offers an alternative way to participate in trends within the US equity market. As with all investment strategies, risks remain and positive performance cannot be guaranteed.