The U.S. midterm elections could reshuffle stock market winners depending on which party ends up controlling Congress, according to JPMorgan. Described as “one of the year’s most anticipated political catalysts,” strategists at the bank believe the equity impact across election outcomes will “likely be more nuanced and favor stock picking,” they wrote Thursday in a note.

With the elections about a month away, the bank highlighted baskets of stocks positioned to benefit. The first is “gridlock” beneficiaries if Congress is split between the parties, and the other is “Blue Wave” beneficiaries if Democrats win both chambers.

At stake is the Republican majority in Congress which has shaped tax, spending and regulatory policy. But congressional polling, betting odds and the incumbent party’s historical tendency to lose seats suggests Republicans face a challenging election, JPMorgan said.

A split Congress could limit potentially disruptive policy, while Democratic control could shift policy at the margin through efforts to either preserve or unwind existing policies. The gridlock basket tends to be the most favorable scenario given it creates “limited downside policy risk,” said JPMorgan’s Dubravko Lakos-Bujas.

“Congressional gridlock has been associated with positive S & P 500 returns since 1950,” with the market advancing 21% over a two-year congressional term following elections that produced a gridlock scenario, Lakos-Bujas. That’s slightly better compared with 18% single party congressional control from election day.

Although, analysts noted some of that upside could be limited by the already strong setup into the midterms since S & P 500 is up about 60% from the start of the presidential cycle. Historically, JPMorgan noted that there tends to be more volatility in the run up to the midterm elections, with the VIX volatility index peaking a month before.

But stock market performance in the months that follow tend to be positive. Gridlock winners Sector beneficiaries of a gridlock scenario include healthcare, defense and civil infrastructure and select technology companies.

Healthcare stands out because gridlock could reduce the likelihood of Medicaid cuts, while defense names could benefit from bipartisan military programs and infrastructure spending approved by Congress. Meanwhile, certain large tech companies could benefit from the lower probability of AI regulation.

JPMorgan highlighted Gilead Sciences, Oracle, Meta Platforms and Sherwin-Williams made the cut. Blue wave beneficiaries In a blue wave scenario, the policy landscape would change to reflect funding negotiations, oversight and efforts to preserve or unwind existing policies.

Potential beneficiaries include hospitals, Medicaid focused managed care, Municipal water and environmental-services providers and Renewable-exposed utilities. JPMorgan sees hospitals as the “clearest beneficiaries” if lawmakers delayed or reversed Medicaid reductions.

Environmental services providers if Congress negotiated increased Environmental Protection Agency funding. Also, greater clean energy support would benefit utilities.

In a lower odds “Red wall” scenario, where Republicans maintain control of Congress, that would set up “the most supportive incremental federal policy backdrop” for the AI infrastructure buildout, according to JPMorgan. That would yield into policies that benefit data centers, traditional energy and nuclear power, financials, and defense and cybersecurity.

Some of the stocks mentioned under this category include Devon Energy , Lockheed Martin , L3 Harris , Bloom Energy , Veeva Systems and Bank of America . Regardless of the outcome, JPMorgan expects AI capex momentum to “remain intact” after the midterms and even strengthen in 2027 and 2028, as companies seek to meet demand and accelerate investment ahead of the next presidential cycle.

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