Dow futures rally 700 points as Democrats win big in midterms: Live updates

The U.S. Democratic Party secured control of both houses of Congress in the recent midterm elections, marking a significant victory in a race seen as a criticism of President Donald Trump's policies. The sweeping win led to the Democrats capturing 53 Senate seats and 222 seats in the House of Representatives, signaling widespread discontent with the economy, the Iran war, and inflation.

The outcomes, which took place on November 3, have implications beyond U.S. borders, potentially fostering opposing forces between the White House and Congress.

Equity markets responded to the Democratic sweep, with the S&P 500 equity futures falling approximately 1%. Technology stocks faced pressure due to concerns surrounding AI valuations and tighter regulatory scrutiny. Analysts at BMI, a unit of Fitch Solutions, predicted that Trump would encounter considerable legislative resistance and policy gridlock, although he could continue pursuing policies via executive orders.

Furthermore, concerns over a slowdown in data-center construction and AI investment could lead to an unexpected decline in overall investment, negatively impacting the U.S. economy.

In the short term, the election result might lead to reduced U.S. Treasury yields, as political disputes over fiscal policy and concerns over additional borrowing could ease. However, major negotiations over the U.S. debt ceiling in 2027 pose a significant risk and could become contentious at a time when Treasury yields are already high. The political landscape may prompt investors to reassess the Federal Reserve's tightening outlook, with a shift in probabilities for December rate hikes from 90.8% to 73.5%.

Currencies, particularly the U.S. dollar, experienced a decline as investors analyzed the implications for fiscal spending and monetary policy. A weaker dollar could extend the dollar index's retracement from its mid-October peak, affecting U.S.-dollar-denominated assets for Singapore investors. Commodity prices, including oil and gold, will also be scrutinized in light of the Middle East conflict.

Gold prices declined, falling 0.5% to US$3,925.25 an ounce, while oil prices eased inflation concerns. DBS Group Research suggests that Singapore investors could consider purchasing on market weakness, with certain sectors such as Singapore real estate investment trusts (Reits), property developers, and aviation-related companies potentially benefiting from a Democratic win.