The Washington brief

• Polling indicates Democrats have gained momentum heading into the midterm elections, improving their prospects for winning House control, though several key Senate races remain tightly contested. 
• While Republicans face headwinds including affordability concerns and weak presidential approval ratings, the GOP should benefit from strong fundraising and potentially favorable turnout dynamics.
• Congress is expected to defer most major policy decisions until after the election, with lawmakers focused primarily on government funding beyond year-end and the National Defense Authorization Act.

We are entering the final stretch of the election cycle, with early voting already underway in many states. Increasingly, political observers are drawing comparisons to the 2018 midterm elections, when Democrats reclaimed the House during President Trump's first term, though differences in the electoral map and policy backdrop may limit direct comparisons.

Democratic momentum has continued to build as Election Day approaches. The Democratic Congressional Campaign Committee recently expanded its "Red to Blue" program to include six additional candidates, signaling a willingness to compete in districts that have historically leaned Republican. Notably, the newly added districts were carried by President Trump by an average of more than 16 percentage points in 2024, reflecting Democrats' belief that a favorable political environment could produce gains well beyond the seats needed to secure a House majority.

Forecasts and polling have reinforced that optimism. Decision Desk HQ projects Democrats will regain control of the House with approximately 234 seats, or 16 more than the 218 seats needed to take control, though forecasts across models continue to vary. In the Senate, recent polling has shown Democratic candidates narrowing margins or leading in several key races, including Texas, Ohio, and Alaska, expanding the map in a cycle that was once expected to favor Republicans.

Republicans, meanwhile, are contending with a series of political headwinds. President Trump's approval ratings remain under water, affordability concerns continue to weigh on voters, and geopolitical uncertainty related to the war in Iran has further complicated the political backdrop. Republicans argue that strong turnout, fundraising advantages, and the historical challenge Democrats face in winning enough Trump-carried districts and states could ultimately limit Democratic gains.

As Republicans work to defend their narrow House and Senate majorities, they are also confronting a historical tendency for the president's party to lose congressional seats during midterm elections. Despite these challenges, President Trump has remained bullish on the campaign trail, arguing that Republicans can still outperform expectations in November if turnout remains strong. President Trump and Vice President JD Vance have campaigned aggressively on behalf of vulnerable Republican candidates. In recent weeks, Trump has held events in Texas, Oklahoma, and Alabama, while Vance has campaigned in Florida and Alaska. Several of these states feature some of the cycle's most closely watched Senate contests, highlighting GOP efforts to reinforce support in races that until recently were viewed as safely Republican.

Those challenges are becoming increasingly visible in the Republican campaign strategy. Media reports indicate that the National Republican Senatorial Committee has shifted resources away from Senate contests in North Carolina and Georgia to reinforce defending seats in Texas and Alaska. While Republicans continue to maintain meaningful advantages in fundraising and advertising, the party faces a broader challenge in reversing voter sentiment that has increasingly turned against the governing party as Election Day approaches.

Current polling and forecasting suggest a Democratic House majority remains the most likely outcome, while control of the Senate appears considerably more competitive. The election outcome will help determine the scope of congressional oversight, legislative priorities, tax policy debates, and the administration's ability to advance its agenda during the final two years of President Trump's term.

With lawmakers focused on the campaign trail, most unresolved policy issues have been pushed into the post-election lame-duck session. The election results will shape what is politically possible, but Congress must still address several year-end deadlines. Government funding expires on December 11, making a continuing resolution the most likely near-term outcome, while defense programs must be reauthorized through the National Defense Authorization Act.

Beyond must-pass legislation, prospects for major policy initiatives remain limited. The CLARITY Act, which would delineate crypto regulatory authority between the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC), continues to face difficult legislative odds. While lawmakers could attempt to package the measure with community-bank regulatory relief proposals, such an approach appears unlikely to gain meaningful traction. If the bill were to advance, lawmakers could also consider a bipartisan amendment to restrict stablecoin issuers from offering deposit-like yield products. In the absence of legislative action, regulators are moving ahead. The SEC and CFTC continue to advance crypto-related rulemakings, including a recent CFTC proposal establishing a regulatory framework for retail crypto commodity transactions. As a result, investors should expect more near-term regulatory activity than legislative breakthroughs.

More broadly, the window for advancing major policy changes narrows as Congress moves closer to a potential transfer of power. If Republicans retain both chambers, leadership has greater flexibility to defer unresolved priorities. If either chamber changes hands, the outgoing majority will have only a limited opportunity to secure confirmations and advance remaining priorities before January.

Looking ahead to the next Congress, artificial intelligence (AI) is likely to remain a bipartisan focus. House Democrats have discussed creating a select committee on AI that, while unlikely to have legislative authority, could possess subpoena power. More broadly, a Democratic-controlled chamber could lead to increased oversight of AI firms and other heavily regulated industries. For public companies, heightened congressional scrutiny could present incremental compliance, disclosure, and reputational risks over the next two years.

The political backdrop has become increasingly favorable for Democrats heading into the final weeks of the election cycle, though the battle for congressional control remains uneven across chambers and highly dependent on turnout dynamics. At the same time, policymakers will largely defer major legislative decisions until after the election, leaving Congress to focus primarily on year-end funding and other must-pass measures.

For investors, the more important question may be what follows the election rather than the election itself. The outcome will influence the pace of regulation, oversight, tax policy debates, and the administration’s ability to advance its agenda, with AI and crypto regulation likely to remain key areas of focus regardless of which party ultimately controls Congress.