US Midterm Election Rally Is Here? 5 US Stocks That Could Benefit From US Policy Changes

Historical data shows that the U.S. president's party typically loses congressional seats in midterm elections. What makes 2026 unique is that control of the House of Representatives is already built on a razor-thin majority, meaning a few key districts could shift the balance of power in Congress.

If Democrats take the House while Republicans maintain control of the Senate, the likelihood of large-scale tax hikes, comprehensive cuts to energy policies, or radical changes to the financial regulatory system will decline. Although policy gridlock may increase risks around budget negotiations and government shutdowns, it also reduces the probability of businesses suddenly facing major legislative changes.

Morgan Stanley statistics show that since 1930, the S&P 500 Index has gained an average of about 13% in the 12 months following midterm elections. During historical periods when a Republican president faced a divided Congress, the average return in the year after the election was even higher. However, these data only illustrate historical patterns and cannot rule out the possibility that economic recession, inflation, and interest rate changes could exert a greater impact on the market.

1. Lockheed Martin (LMT): Core Defense Asset with Bipartisan Support

Defense spending is perhaps the policy area least likely to see a fundamental reversal due to midterm election results. Even if Democrats retake the House of Representatives, missile defense, munitions replenishment, space systems, and weapons procurement for U.S. allies maintain a strong bipartisan foundation.

Lockheed Martin is a primary supplier for F-35 fighter jets, THAAD missile defense systems, and various missile weaponry, giving it direct exposure to changes in the U.S. defense budget. At the end of the second quarter of 2026, the company's order backlog reached a record $230 billion, including a $35 billion multi-year THAAD contract; the company also raised its full-year revenue guidance to approximately $79.75 billion to $81.75 billion.

If the election yields a divided Congress, fiscal spending in other areas may be constrained, but national security programs tend to gain cross-party support more easily. Lockheed Martin could thus become a target with relatively high certainty in the election context. The main risk is that defense budgets are already at elevated levels, and valuations could come under pressure if the market begins pricing in a "peak in defense spending."

2. Palantir (PLTR): Direct Beneficiary of Government AI Spending

Palantir aligns with two main policy themes: artificial intelligence and defense technology. Its software is widely used in intelligence analysis, battlefield management, data integration, and government decision-making. The U.S. Department of Defense's expansion of AI procurement could bring the company more long-term contracts.

The U.S. Department of Defense has pushed to make the Maven Smart System an official program of record, which will enhance the continuity of related budgets and procurement. Compared with traditional defense contractors, Palantir is better positioned to benefit as defense budgets shift away from heavy hardware toward artificial intelligence, autonomous systems, and battlefield software.

Regardless of which party controls the House, tech competition with China, government data security, and military AI generally enjoy cross-party support. If the midterm elections yield a divided Congress, traditional major legislation may face gridlock, but government agencies can still advance digital investments through annual budgets and procurement contracts. The biggest issue facing Palantir is not demand, but valuation: its stock price has already priced in high growth expectations, and any government contract delays or growth slowdown could trigger a sharp pullback.

3. JPMorgan Chase (JPM): Political Gridlock May Reduce Risk of Sudden Regulatory Shifts

Large banks usually do not need a sweep by either political party; rather, they prefer stability in regulatory and tax policies. A divided Congress could lower the probability of corporate tax hikes, expanded bank oversight, or dramatic changes to capital rules, while also helping corporations resume M&A and financing decisions.

JPMorgan Chase boasts a diversified business spanning consumer banking, credit cards, asset management, trading, and investment banking, enabling it to benefit simultaneously from active capital markets, increased M&A deals, and a rebound in corporate loan demand. In the second quarter of 2026, its investment banking fees rose 30% year-over-year, and market revenues grew 35%, showing that trading and financing activities have become major growth drivers.

If policy visibility improves after the midterm elections, corporations may restart previously delayed plans for IPOs, acquisitions, and bond issuances, with JPMorgan Chase being a direct beneficiary. However, if a debt ceiling dispute or government shutdown erupts post-election, financial market volatility and credit risks could rise in tandem.

4. ExxonMobil (XOM): Energy Policy Beneficiary if Republicans Retain Congress

ExxonMobil's election thesis is more directional. If Republicans retain control of Congress, expanding U.S. oil and gas extraction, expediting approvals for pipelines and LNG projects, and maintaining looser environmental regulations could continue to support traditional energy companies.

Middle East conflicts and risks along key shipping lanes have highlighted the importance of U.S. energy security. Even if Democrats capture the House, it would be difficult to immediately overturn the White House's existing executive energy policies, though they could increase policy uncertainty for oil companies through investigations, budgets, and legislative scrutiny.

ExxonMobil operates an integrated business from upstream exploration to refining and chemicals, enabling it to benefit simultaneously from higher oil and gas output and rising energy prices. In the first half of 2026, the company generated nearly $20 billion in free cash flow, giving it the capacity to continue investing and returning value to shareholders. Its primary risk is that energy stocks are ultimately more driven by oil prices; if Middle East tensions ease and drive a rapid decline in crude prices, policy tailwinds may not fully offset earnings pressure.

5. Coinbase (COIN): Crypto Legislation Could Be a Key Post-Election Variable

Coinbase is the most policy-sensitive and volatile among the five stocks. In September, the U.S. Senate failed to advance a crypto market structure bill, with the measure receiving only 49 votes—short of the 60 required to end debate. Coinbase shares fell sharply following the news, demonstrating that regulatory progress has become a key variable in its valuation.

If the midterm elections yield a larger number of pro-digital asset lawmakers and Congress revives efforts on trading, custody, stablecoins, and token classification rules, Coinbase could be a primary beneficiary of regulatory clarity. Clear rules could lower compliance costs for institutional entrants into digital assets while expanding Coinbase's custody, trading, and subscription services revenue.

Conversely, if Democrats gain stronger control of Congress and shift the focus toward conflicts of interest, investor protection, and anti-money laundering regulations, the legislative process could face continued delays. Consequently, Coinbase is better suited as a high-beta policy trade rather than a high-certainty midterm election beneficiary.

From the perspective of policy certainty, the logic for Lockheed Martin and Palantir is relatively clear. Regardless of how Congress changes, defense, cybersecurity, and government AI investments are unlikely to undergo a complete reversal. The difference between the two is that Lockheed Martin boasts a larger long-term order backlog and cash flow, whereas Palantir offers higher growth elasticity, though its valuation risk is also more prominent.

JPMorgan Chase is closer to a "divided Congress" trade; if the election results reduce the probability of drastic shifts in tax and regulatory policies, banking, M&A, and capital markets businesses may benefit.

ExxonMobil and Coinbase display clearer directional sensitivity: the former relies more on the Republican Party continuing its energy policies, while the latter depends on whether pro-crypto legislation can break through congressional gridlock.

Overall, the midterm election market is not a simple bet on a Republican or Democratic victory. A more reasonable approach is to focus on whether the election results can improve a company's future revenue and cash flow. By this standard, defense and government tech have the highest policy continuity, financial stocks benefit from regulatory stability, and energy and crypto may offer greater stock price elasticity alongside higher policy risks.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.