US midterm elections 2022

ElectionWatch: Scenario analysis of the congressional election outcomes

The balance of power

Incumbent Democrats face myriad challenges in the runup to this year’s midterm elections. Inflation is running at a 40-year high, and President Joe Biden’s job approval rating has not recovered from the chaotic US withdrawal from Afghanistan. Thirty-one House Democrats have already chosen to abandon their reelection efforts, which may be as useful an indicator as any of the prospects for a change in control in the House of Representatives.

Market impact

The most likely outcome in November is a divided government. Markets tend to take such outcomes in stride, but it is also fair to assume that volatility will increase as policy differences become more apparent. In this video, Nadia Lovell, Senior Equity Strategist, discusses the overall market impact of the midterms.

Scenario analysis

We expect the GOP to assume control of the House in 2023. Whether they win enough seats to constitute a “wave” election is still uncertain. Regardless of the margin of control, we foresee a divided government. To the extent that Republicans assume control of the House, President Biden will follow in his predecessors’ footsteps and rely upon executive orders and administrative rules to implement his domestic agenda.

We have discarded a fourth scenario, where Democrats retain control of the House but lose the Senate. While theoretically possible, the outcome of election campaigns for the House are tied to the president’s popularity. For Democrats to retain control of the lower chamber, Biden’s low job approval ratings would have to rebound sharply. If that were to happen, however unlikely, we would also expect no change of control in the Senate.

Republicans assume control of both the Senate and House

Democrats retain control of the Senate but lose the House

Democrats retain narrow control of both Houses of Congress

The economic outlook and policy implications of each scenario are reserved for clients only. Get in touch to learn more.

External view

CIO in conversation

We sat down for an interview with John Savercool, Head of the UBS US Office of Public Policy, and Jeb Hensarling, Executive Vice Chairman, UBS Americas.