Markets will take their cues from interest rates, inflation, jobs data and Iran, not from Congress alone, analysts told Khaleej Times on Thursday, even though Democrats now control both the House and the Senate after the US midterm elections. The coming weeks will be less about who won Congress, according to Hamza Dweik, head of trading at Saxo Bank, and more about what the new balance means for US rates, fiscal spending, Iran policy, energy supply and AI regulation. The election changed the politics. The data will decide the economics.
Why it matters
Friday brings the first test. The payrolls report will shape expectations for the Federal Reserve December meeting, where markets still price a strong chance of a rate rise, and it will show whether the labour market is cooling, holding or strengthening after a year of high rates and trade disruption. Gold investors are watching the same data: a hold above 4,000 dollars an ounce after this week jobs and inflation figures would signal a lasting recovery, according to analysis published on Thursday, while a weak report could push the metal higher still as rate rise expectations fade.
The Fed, inflation and labour market data will matter far more in the months ahead, analysts said, because the election does not change monetary policy overnight. The Federal Reserve sets rates on the basis of inflation and employment, not on the basis of who controls Congress, and a Democratic majority cannot compel the central bank to cut or to hold. That independence is a feature of the system, and it means that the most important economic decisions of the next two months will be made by the Fed, not by the new Congress.
What happens next
AI and technology shares are expected to see the greatest volatility, according to the same analysis, because a Democratic Congress could bring closer scrutiny of semiconductor exports, competition, data centre energy use and AI capital spending. Morgan Stanley expects US business investment to rise about 7 percent year on year in the fourth quarter of 2026 and 8 percent in 2027, with AI related spending a major part, but that forecast assumes the regulatory environment does not change abruptly. The jobs data will not settle the AI question, but it will shape the growth outlook that underpins it.
For readers, the practical advice is to watch the data calendar rather than the political calendar. Friday jobs report, the next inflation reading and the December Federal Reserve meeting are the events that will move markets, mortgages and borrowing costs in the weeks ahead. The election was a verdict on the past two years. The data will be a verdict on the next two months, and it is the second verdict that will matter more to household budgets.
