The stock market rose sharply on Wednesday after Democrats won the 2026 midterm elections decisively. Economists and strategists linked the rally to President Trump's response to the results.
Trump told The New York Times and The Wall Street Journal overnight Tuesday that he accepted the results and would work with Democrats. Those reports coincided with a rebound in stock market futures.
Thomas Hempell, senior economist at Generali Investments, said Trump's acknowledgement and openness to working with the opposition "have helped markets to rally on hopes that contestation of the results and more adverse polarization can be avoided."
Before the midterms, some on Wall Street worried that Trump might contest the results. The report cites a Department of Justice Alaska election lawsuit that raised fears of delays.
In a CNBC Fed Survey of 30 fund managers, strategists and economists, 63% said extended uncertainty over the balance of power from legal challenges posed "some" market risk, up from 61% in September. 14% said it posed "significant" risk, up from 7%.
George Saravelos, head of FX Research at Deutsche Bank, said Trump's acceptance of the results should "act as a break on extreme policy outcomes and bring down risk premia," as long as the president's position holds.
Jay Woods of Freedom Capital Markets said the overnight rebound was partly due to Trump's "initial tone and reaction to the results." He said the key question is whether the stance lasts. "He is an X factor," Woods said.
Woods also pointed to headwinds, including inflation pressures tied to higher energy prices from the conflict in the Middle East.
Philip Blancato of Osaic said that if Trump "continues to play nice" with Democrats, the market could have a "very strong" end to the year. He said reaching 8,000 on the S&P 500 by year-end is not "totally out of the question."
The broad market index gained more than 1% on Wednesday. Its closing price implied a roughly 4% gain to that level, according to the report.