My Midterms Prediction

A blue tsunami is coming in the midterms… and I’ve seen this movie before. I can guarantee how it ends: Democrats are going to screw it up. History says so.

In all the years I’ve been writing about investing and economics, I’ve watched both blue tsunamis and red waves overrun Congress—1994, 2010, 2018.

And each time, the party that swept into Congress thought voters had handed it a mandate. They had not. Voters had simply fired the previous party for cause.

And every time… the winning party misread the results and promptly screwed up by overspending their political capital.

Voters going to the polls next month aren’t wrong to be mad. Grocery prices are up. Gas prices are up—a lot. Utility bills are draining family wallets faster than inflation. The jobs market is a 98-pound weakling. And America is embroiled in a costly war it can’t get out of, and which is slamming everyone from consumers to the farmers growing your food.

Almost every poll shows voters are furious and Democrats are ahead. Rasmussen, long a favorite of the right, has Democrats up 5 points. Even Fox News finds nearly two out of every three voters say the Trump administration apparently has the economic aptitude of a gerbil, and they’re furious.

Polymarket, a blockchain-based prediction market, has Dems at a 65% chance of sweeping both houses of Congress because even bettors know that voters want somebody to fix America’s mess.

Sadly… history says the fix isn’t likely to happen.

So here are the dots and how they likely connect:

Prediction 1: Wall Street throws a party.

Since 1950, the stock market has been higher one year after every single midterm election. 19 for 19. Doesn’t matter who wins.

Wall Street loves gridlock, and a Democrat-controlled Congress facing a pugnacious Republican president wielding a veto Sharpie makes Los Angeles rush-hour gridlock seem like a birthday-party bumper-car ride.

But it’s not always a smooth ride.

In the year after the 1986 midterms, the market crashed 20% in a single day. It fell nearly 20% during the 2011 debt-ceiling fight. Both times it still ended higher, through there was pain along the way. So history says Wall Street is higher this time next year… but I’ll add that all bets are off if the AI bubble pops.

Prediction 2: Health insurers… some winners, some losers.

Trump and GOP leaders refused to extend the Obamacare subsidies last year, and roughly 3 million people dropped their coverage because health insurance costs shot to the moon.

Democrats are already promising to reinstate those subsidies.

So, if the Blue Tsunami rolls ashore, expect the insurers that cover the working poor and the self-employed—Centene, Molina Healthcare, Oscar Health—to rally on hope.

The giants that run Medicare Advantage, however, will likely be a different story.

Democrats want to crack down on how those companies bill Medicare, and they’ve talked about breaking up insurance giant UnitedHealth and pharmacy giant CVS. Those stocks get hammered whenever Washington leans on Medicare.

The last time Democrats ran Congress against a Republican president, in 2008, Democrats paid for a Medicare fix by cutting what Medicare pays those private plans.

Today’s Democrats will probably reach for the same playbook.

That’s the first two predictions. Numbers three, four, and five are tomorrow.

See you then…