Growing Expectations for a Midterm Election "Blue Wave" Holds 2 Risks for the 2nd Priciest Stock Market in History

As prediction markets show a 68% probability of Democrats sweeping both houses of Congress in the Nov. 3 midterm elections, a potential 'blue wave' presents two key risks for the historically expensive stock market. First, stricter AI regulations could threaten the multitrillion-dollar AI infrastructure build-out that has been the primary driver of the market's four-year rally. Second, a divided Congress would complicate debt-ceiling negotiations expected in the first half of 2027, potentially leading to government shutdowns that could harm corporate earnings.