Geopolitical Strategist Thomas Mucha and Macro Strategist Juhi Dhawan discuss what's at stake for US and global investors and their outlook for what's next.
Host Thomas Mucha and Macro Strategist Juhi Dhawan examine how the November 3 US midterm elections could reshape fiscal policy, market leadership, Treasury yields, inflation and AI regulation — and assess the implications for US and global investors.
2.15 – Why this midterm cycle is different
3:55 – How the election outcome could move markets
4:40 – Midterm scenarios
11:54 – Treasury yields, deficits and the debt ceiling
13:45 – Why inflation and affordability remain important variables
16:49 – AI policy, regulation and national security
22:40 – What the US midterms mean for global investors
Juhi Dhawan: I think something that has been a defining feature of this business cycle is that this is the fourth supply-shock-driven inflation increase that the economy has experienced. We as investors are very familiar when prices go up because of demand reasons. We know that the Federal Reserve can take appropriate action and we can bring this under control. However, if it's an energy price increase that's because of a war that's, underway currently, or there was a war between Russia and Ukraine, or there were tariffs or so on. These are policies that the Federal Reserve can do something against, but not as much.
Thomas Mucha: Over the next month or two, we're going to hear an awful lot about the US midterm elections, and for good reason. Polling averages show Democrats maintaining an advantage on the generic congressional ballot, while Republican control of both chambers appears, let's say contestable. Now what looked several months ago, like a relatively favorable Senate environment for Republicans, now appears considerably more competitive.
Meanwhile, voters continue to focus on issues ranging from inflation, affordability to immigration to energy prices as well, of course, as the continuing effects of the ongoing Iran conflict. So plenty to discuss. Joining me today to talk through these questions is Macro Strategist Juhi Dhawan, who's one of the firm's most astute observers on the U.S. policy and political backdrops, including Capitol Hill, the White House and, of course, the Fed.
She's also a longtime close colleague of mine. So, Juhi, welcome back to WellSaid.
Juhi Dhawan: Thank you. Thomas, it's great to be back, especially for this particular episode, because I think it has so many implications for investors to think about.
Thomas Mucha: Well, the midterms are coming up closely, so we're very happy to have you here. So as we sit here Juhi in the weeks before November 3rd, which of course is the date of the US midterms, what strikes you as the most different aspect of this current political cycle as it relates to the midterms?
Juhi Dhawan: Something unique about this environment is that fiscal policy has been so dominant since COVID. So every election since COVID has been supercharged for investors, because there have been so many policy shifts that occur, this midterm could change the makeup of Congress, as you just referenced. And that means the ability for the president to maneuver may get limited or may get expanded, depending on what the outcome is.
So that's from an economic standpoint. Something from a historical standpoint to consider about elections in the United States, though, is that with redistricting and a number of shifts that have occurred, the number of competitive races that exist in any election continues to narrow. So in some ways, it's easier for people to know which races to focus on, but harder to call because the margin of error continues to go down.
Thomas Mucha: Right. So there's more noise in the system, more political volatility. One of the things that we've been talking about a lot is political uncertainty in this cycle. We've got the domestic political debate. We've got the Iran war. We've got all this news on artificial intelligence with the Treasury and the Fed generally. So how much influence Juhi, do you think this high degree of uncertainty is having on the direction of investor sentiment?
And most importantly, where could the outcome of November 3rd genuinely matter for markets?
Juhi Dhawan: The economic uncertainty environment has plagued us for several years now. So as investors, I think we've become used to living with a higher degree of uncertainty than in the past. This year, equity markets have been really fortunate in seeing a very strong earnings backdrop, which has allowed for some of the volatility that is associated with policy uncertainty to be offset.
Thomas Mucha: The good news is washed over that.
Juhi Dhawan: Yes. Still. What I would say to you is until we know the election outcome, there is a certain sense of not knowing where policy may shift. So what we are watching most closely, of course, is whether a single party, namely currently the Republican Party, has control of both houses, whether that will remain the outcome. If we end up with a split Congress, or if we end up with a sweep on the other side for the Democrats, policy will likely see meaningful shifts.
And that matters for investors as the market continues to rotate towards who will be the relative winners of the future rather than those of the past.
Thomas Mucha: Let's dig into that. Let's look at the sectors that might be the winners and losers in each of those scenarios that you just laid out.
Juhi Dhawan: All right. So let's start with the status quo of saying the Republican Party maintains both houses.
Thomas Mucha: An unlikely outcome.
Juhi Dhawan: An unlikely outcome is really my first statement. And I would say this would allow the president to continue with the agenda as he sees today, many of the policies shaping the agenda, alongside having some ability to legislate. I'm going to leave this one aside because I really think statistically it's showing the lowest probability. The high probability event, that mostly the market has factored in is split Congress.
Republicans retain control of the Senate. The Democrats flip the House. This would be something that's quote unquote normal, as midterm elections are often a referendum on the sitting president.
Thomas Mucha: Can you say normal in this environment, really?
Juhi Dhawan: Midterm elections are often a referendum on the sitting president, and usually the ruling party tends to lose seats. So the House win by the Democrats would be a base case for most in this environment. And just as a backdrop, there are about 29 seats that are in contention or toss-ups in the House as we speak, and we really need to see the Republicans, or the Democrats, if you will, the margins again, being very, very narrow.
We're talking about really seeing a switch of about 4 to 5 seats to change hands in order to make a big difference. So if we were to get a split Congress, the most important thing to keep in mind is that the room to legislate will get limited, and the oversight of the president will go up. That's number one.
What will happen is that I believe the lame duck session will be quite lively. So buckle up before year end. We might still have one last hurrah on policy, and the emphasis that I would place in this regard would be on defense spending. I think that the president has laid out a very strong agenda towards defense spending, as you, Thomas, have articulated many times.
And I believe that the Republican party would like to leave the president in somewhat good shape and would try to get through perhaps a reconciliation 3.0 before the change in Congress – an somewhat unexpected event relative to where the market sits today. But we could see supplemental defense spending because of the war. We could see some updated numbers for the appropriations bill.
We might also see some funding for agriculture, perhaps some shifts in infrastructure spending. All of those could come together in a package, maybe as big as a half a percent of GDP.
Thomas Mucha: $5,000 checks for every American.
Juhi Dhawan: That's not on my list. I have to say, and we can come back to this, but I think the action in the Treasury market is suggestive of somewhat more limited fiscal space in the United States, and I think that would be a very expensive proposition, hard for narrow margins in Congress to get through. Let's move to the other side of the equation, something that has, as you said, as races have become competitive, has reached a little bit more traction, which is that the Democrats actually sweep both houses of Congress.
The blue wave, if you will. It might be a mini wave given the numbers that we're talking about. But it would be meaningful because the focus would move towards areas that are Democratic priorities, such as health care. Let me mention two or three areas that I would watch most closely in that environment.
Number one, NIH funding cuts that were proposed by the Republicans might get neutralized. So might the Medicaid cutbacks that are set to come into effect starting in 2027. SNAP cutbacks could also come under renewed scrutiny, and the Democrats may choose when the infrastructure bill gets extended or reworked. They may choose to bring renewables back in favor. Those are all micro shifts, but within the equity market, reason for rotations that we have been seeing as investors realize better earnings trajectory for some of these areas that are favored by the Democratic Party.
I think one other thing that's an overarching theme that I expect could occur as a result, and that is that besides greater oversight into the president and his actions, a Democratic sweep may also keep the focus on affordability, as that remains a key issue for American voters. And I could anticipate a scenario next year where Democrats bring forward many companies to the forefront, asking for greater explanations, for instance, on what happened to the tariff rebate checks.
How did companies actually help consumers?
Thomas Mucha: Because they'll have the power of the agenda and they'll be able to bring people onto Capitol Hill in a very public setting?
Juhi Dhawan: Exactly. And that's why controlling Congress could really shift the tone and the direction and emphasis of policy as we move forward.
Thomas Mucha: What's your view on bipartisan relations in that scenario? Obviously, we will get more oversight from Democrats. What about the “I word”, impeachment? You know, I keep hearing from my contacts on Capitol Hill that the Democrats don't want to do it, but they might not be able to resist the urge. Yeah. I'm wondering how you sort of parse that.
Juhi Dhawan: I think one of the things that I'm watching very carefully here is which Democrats do well in this election. Is it the progressives who gain the upper hand, or is it the moderates who keep control of the purse strings? My sense is that that will also give us, the direction of where the emphasis will be. So I think impeachment can be discussed, but if it's the moderates in charge, the focus might be more on investigations, bringing up these questions on affordability and also really raising the questions as they relate to health care and spending policies going into the 2028 elections.
Thomas Mucha: And obviously, yeah, the 2028 elections, that campaign will begin on November 4th.
Juhi Dhawan: That's right.
Thomas Mucha: All right. I do want to widen the lens here a bit. You did mention the recent focus on Treasury actions. So in your view, Juhi, what does that tell us about the macro environment that we're operating in. Does that mean the bond market is a more important market variable to watch, particularly among rising debt levels in the US, which of course have recently crossed $40 trillion and is approximately, 125% of U.S. debt-to-GDP?
Thomas Mucha: So how are you thinking about the bond market and what's been happening in recent weeks?
Juhi Dhawan: I actually believe the results of the legislative agenda being either curtailed or expanded will matter a lot to the bond market. And so, in many ways, the size of what is put on the table could be de facto dependent on the outcome of this election. And the pressure, in turn, that it will mean for Treasury Secretary Bessent, in terms of trying to put a lid on Treasury yields.
So let me peel that onion a little bit more. The way I would describe this is if we were to have gridlock and we can't really spend more money, that could be quote unquote, relatively good news for yields. It may not be the best outcome for economic growth, but it might actually put a little bit of a dampener on Treasury yields.
On the other side, if we have no constraints on the legislative agenda and spending and taxes are still on the agenda, the likelihood of more issuance and more pressure on yields will stay as a reality for investors. I do believe the emphasis of Congress continues to be where the emphasis of the American people is.
And the emphasis when we look at polls continues to be the economic conditions in the US economy, alongside questions around affordability, those still maintain priority over the question of the budget deficit. So politicians take their cues from people, and I think that will continue to be the case.
Thomas Mucha: So you don't expect the debt issue to be a deciding factor in this election? It's more affordability, inflation and what does this mean to me as a voter?
Juhi Dhawan: I think that's right. But what I will say to you is we do have to raise the debt ceiling next year. I mentioned to you a possibly lively year-end lame duck session. And so the question is, will the Republicans try to get that debt ceiling done through reconciliation to put less upward pressure for the president next year?
Or will the Democrats have that as a bargaining chip next year, if they were to sweep and try to make it more difficult for the president wanting to use that to get leverage on some of the issues that they care about. So the markets are going to be watching most closely, not just the outcome of the midterm election, but the immediate aftermath to see can we clear the decks on some of these lingering issues, because the debt ceiling and the inability to raise it in an efficient manner is something that the bond market would care a lot about.
Thomas Mucha: You're making a very effective argument here, Juhi, that this election does matter.
Juhi Dhawan: Yes.
Thomas Mucha: All right. I want to dig a little bit more into inflation and affordability. Right. I think it's one of the defining issues in any election. And no election discussion would be complete without an analysis of that. That's also true globally, of course. But what do you think U.S. investors are finding particularly challenging with regard to the current inflation outlook?
Juhi Dhawan: I think something that has been a defining feature of this business cycle is that this is the fourth supply-shock-driven inflation increase that the economy has experienced. We as investors are very familiar when prices go up because of demand reasons. We know that the Federal Reserve can take appropriate action and we can bring this under control. However, if it's an energy price increase that's because of a war that's, underway currently, or there was a war between Russia and Ukraine, or there were tariffs or so on.
These are policies that the Federal Reserve can do something against, but not as much. And that's been a challenge because each of these has pushed up prices. It has raised affordability challenges, but it has also made solving how to get to the other side of it much harder, because monetary policy acts with a lag. And if these are one-year shocks, the prescription on whether you should move or not is a more contentious one and one of debate, rather than of easy unanimity.
Thomas Mucha: And listeners of this podcast and viewers of this podcast will know there's a lot of geopolitical volatility out there. I don't think we're headed to a world that will be calming. And so I think a lot of these shocks are going to be part of the political, economic and trade policy backdrop for a very long time. One of those, of course, is artificial intelligence.
There's been a lot happening in this space. We talk about it a lot here, particularly through my national security lens. But I want to focus on your expertise here. You've written a lot about AI and productivity gains in particular, so what's your advice to investors about AI in the context of this election?
Juhi Dhawan: I think first off, we're seeing that the voters are becoming much more concerned about the impact of AI in their own backyards, whether it's the data center construction, whether it's the price of electricity, whether it is issues of child safety or national security, or AI ‘s impact across the economy as it grows. It also raises the specter of whether there will be regulation to follow.
Thomas Mucha: What do you think?
Juhi Dhawan: Thomas, I think with something that becomes as pervasive as AI is supposed to get, I would say that regulation is almost inevitable. The question is when, how much, and in what form. And there the lack of clarity is also obvious. What I would say to you is if we stick to the sort of the scenarios we were thinking about, in a Democratic sweep, I think the scrutiny goes up a lot more.
The Republican Party has chosen to really stress the pro-growth aspects of AI, and the president especially has really pushed in that direction, arguing for staying full course on AI because of the competition with China as well. But the Democratic party has expressed a little bit more concern because of pushing forth on this affordability challenge, but also safety. So I expect maybe data centers or some of these other aspects coming under greater scrutiny, should the Democrats sweep.
I'll take it a step further and say it takes time for legislation to occur. Like I said, even if you know something needs to happen, it doesn't always happen right away. There is a great risk here that, as with other technological innovations, it is an accident or something that happens which catalyzes action if nothing like that occurs.
My bet would be that the 2028 election is going to see many candidates embrace AI and its regulation as part of their platform, and 2029 after that election occurs could see bipartisan support even for AI regulation. That's a much longer time frame than sort of right away. But if AI continues to grow as many expect it to, the possibility that regulation will come is also something that we should take into account.
Thomas Mucha: Thank you for that. I'm going to throw the other arguments up against this for a minute here in that, you know, through my national security lens, and you've heard me talk about this a lot. Juhi and I have offices that are next to each other, so we talk a lot. But what I'm concerned about are the great power competition aspects of this.
And every policymaker that I talk to through the national security lens views artificial intelligence as a national security infrastructure. And so there's a lot of talk in my circles about regulation slowing down innovation, because there's concern that China will get ahead. In fact, the president recently said to reporters, it's all about AI. Whoever wins AI wins great power competition.
So I'm curious how you think through the competing pressures of national security, through the regulation lens.
Juhi Dhawan: And it is really why I sort of slow walked the line on when I think it could be that we get to fruition. There is definite recognition of everything you've said. When I'm in Washington, I hear about all these imperatives. And I think that that really, especially with President Trump in charge, there has been a focus of staying on top of AI and having a lighter touch and regulation.
But if you do have a change at the top of the ticket, which a full election will bring, then I think we have to be open to the idea that it also possibly brings with it regulation, because the lens might shift in terms of emphasis, but again, to bring it back to sort of the gamut of areas where AI is having an impact.
We still don't know which one of them will be the focus. You know, we've talked on and off about export controls or electricity prices or data centers or safety or bioterrorism and so on and forth. The impact is so vast, that it does leave still a lot of room for us to actually know where the shifts would occur.
I'm personally watching states and the regulation coming through there more closely, because I think often they can be a precursor, because they're doing experiments in a smaller place to see what might stick and what could eventually become a template for federal changes.
Thomas Mucha: One of the things that's been clear to me is that the pace of change in artificial intelligence vastly exceeds Washington's ability to keep up through either legislative or broader regulatory issues. I think this is going to be a conversation that you and I are going to be having for a very long time past the midterms and into 2028 and beyond.
Juhi Dhawan: I agree with that one.
Thomas Mucha: All right. I want to move the lens even broader a little bit. And of course, U.S. elections matter globally in that policies emanating from Washington tend to cross borders. Hello, Canada. Hello, Europe. Of course they impact economies around the world. From your perspective, Juhi, how should non-U.S. investors be thinking about the U.S. midterms? What advice would you have for our audience outside of the noise of the United States right now?
Juhi Dhawan: The first thing, I guess I would say is, again, focusing on the size of the fiscal packages is very important because it helps determine the aggregate growth outlook for the United States, which then has spillovers into interest rates, inflation, so on and forth. And so whether we end up with a year-end package, whether we end up with gridlock are important questions, because for the first time, going into 2028, if we see no change coming out of this midterm election, there was absolutely no legislative agenda that followed, we would see in the U.S. half a percent of fiscal tightening next year. That's different than where we've been since we came out of COVID. And I think that would matter across all asset allocation decisions as we go into next year. The next thing, I guess, is if you have a little bit longer time horizon and you're thinking past just the midterms towards 2028, I would really watch the makeup of who wins and how much what parts of policy really resonated with voters.
So, for instance, do the moderate Democrats keep their power or does the progressive wing gain another leg? That matters because that will tell us whether the 2028 election will be about issues like entitlement spending and health care reform, or whether we might have more compromises around tax policy or shifts in that direction. And then the last thing, I guess I would say about the midterm election and why it matters for non-U.S. investors, is, again, when we think about the umbrella of what works in markets.
Defense spending, as you have pointed out, has been a key theme in markets, especially because of President Trump and the focus he has put on really countries getting more independent and focusing on their own defense expenditures. If there were signs that there were some kind of fraying in some of these policies, this would have spillovers in how the rest of the world also conducts some of these policies.
A lot of intricacies, if you will, that are worth watching for, because they will matter in markets over the next 12 to 18 months.
Thomas Mucha: So apologies to the rest of the world. They have to pay as close attention to this as we do. Juhi, let me conclude this conversation with sort of a different type of question. We spend a lot of time discussing what could change after November. But let me turn that question around on you and ask, what do you think is least likely to change regardless of the election outcome?
Juhi Dhawan: I would say President Trump is still in power, and what we want to remember that means is that the use of executive action, the use of tariff policy, the focus on deregulation, all of these will still stay up in the limelight because he has an agenda that he would like to get accomplished over the course of his four years.
Foreign policy is still in the mix. I would expect all of these areas, if anything, to gain more traction if there are limits and constraints on the legislative side of the agenda.
Thomas Mucha: The White House isn't changing no matter what happens on November 3rd. All right. Well, once again, Juhi Dhawan, macro strategist here at Wellington, thanks so much for helping us unpack what we should be paying attention to out of the midterms. And we really appreciate having you here.
Juhi Dhawan: My pleasure. Thomas. Let's see what November 3rd brings out for all of us. Take care.
Thomas Mucha: Thank you.
Views expressed are those of the speaker(s) and are subject to change. Other teams may hold different views and make different investment decisions. For professional/institutional investors only. Your capital may be at risk. Podcast produced October 2026.
Wellington Management Company LLP (WMC) is an independently owned investment adviser registered with the US Securities and Exchange Commission (SEC). WMC is also registered with the US Commodity Futures Trading Commission (CFTC) as a commodity trading advisor (CTA) and serves as a CTA to certain clients including commodity pools operated by registered commodity pool operators. WMC provides commodity trading advice to all other clients in reliance on exemptions from CTA registration. WMC, along with its affiliates (collectively, Wellington Management), provides investment management and investment advisory services to institutions around the world. Located in Boston, Massachusetts, Wellington Management also has offices in Chicago, Illinois; Radnor, Pennsylvania; San Francisco, California; Frankfurt; Hong Kong; London; Luxembourg; Milan; Shanghai; Singapore; Sydney; Tokyo; Toronto; and Zurich.
This material is prepared for, and authorized for internal use by, designated institutional and professional investors and their consultants or for such other use as may be authorized by Wellington Management. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. In Canada, this material is provided by Wellington Management Canada ULC, a British Columbia unlimited liability company registered in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan in the categories of Portfolio Manager and Exempt Market Dealer.
In Europe (excluding the United Kingdom and Switzerland), this material is provided by Wellington Management Europe GmbH (WME) which is authorized and regulated by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin). This material may only be used in countries where WME is duly authorized to operate and is only directed at eligible counterparties or professional clients as defined under the German Securities Trading Act. This material does not constitute investment advice, a solicitation to invest in financial instruments or information recommending or suggesting an investment strategy within the meaning of Section 85 of the German Securities Trading Act (Wertpapierhandelsgesetz).
In the United Kingdom, this material is provided by Wellington Management International Limited (WMIL), a firm authorized and regulated by the Financial Conduct Authority (FCA) in the UK (Reference number: 208573). This material is directed only at eligible counterparties or professional clients as defined under the rules of the FCA.
In Switzerland, this material is provided by Wellington Management Switzerland GmbH, a firm registered at the commercial register of the canton of Zurich with number CH-020.4.050.857-7. This material is directed only at Qualified Investors as defined in the Swiss Collective Investment Schemes Act and its implementing ordinance.
In Hong Kong, this material is provided to you by Wellington Management Hong Kong Limited (WM Hong Kong), a corporation licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), and Type 9 (asset management) regulated activities, on the basis that you are a Professional Investor as defined in the Securities and Futures Ordinance. By accepting this material you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. Wellington Investment Management (Shanghai) Limited is a wholly-owned entity and subsidiary of WM Hong Kong.
In Singapore, this material is provided for your use only by Wellington Management Singapore Pte Ltd (WM Singapore) (Registration Number 201415544E). WM Singapore is regulated by the Monetary Authority of Singapore under a Capital Markets Services Licence to conduct fund management activities and is an exempt financial adviser. By accepting this material you represent that you are a non-retail investor and that you will not copy, distribute or otherwise make this material available to any person. In Australia, Wellington Management Australia Pty Ltd (WM Australia) (ABN 19 167 091 090) has authorized the issue of this material for use solely by wholesale clients (as defined in the Corporations Act 2001). By accepting this material, you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. Wellington Management Company LLP is exempt from the requirement to hold an Australian financial services licence (AFSL) under the Corporations Act 2001 in respect of financial services provided to wholesale clients in Australia, subject to certain conditions. Financial services provided by Wellington Management Company LLP are regulated by the SEC under the laws and regulatory requirements of the United States, which are different from the laws applying in Australia.
In Japan, Wellington Management Japan Pte Ltd (WM Japan) (Registration Number 199504987R) has been registered as a Financial Instruments Firm with registered number: Director General of Kanto Local Finance Bureau (Kin-Sho) Number 428. WM Japan is a member of the Japan Investment Advisers Association (JIAA), the Investment Trusts Association, Japan (ITA) and the Type II Financial Instruments Firms Association (T2FIFA). WMIL, WM Hong Kong, WM Japan, and WM Singapore are also registered as investment advisers with the SEC; however, they will comply with the substantive provisions of the US Investment Advisers Act only with respect to their US clients.
©2026 Wellington Management Company LLP. All rights reserved.