Both parties will be pressured to intervene more in markets after the midterms as economic frustration animates the new Congress, according to an FGS Global sketch of 2027 Washington scenarios, shared first with Axios.
Why it matters: In a Trump-dominated Washington, Congress ceded much of its power and relevance. That'll change three weeks from Tuesday if Democrats win the House, as expected, and perhaps the Senate in the midterms.
The new analysis by FGS, a worldwide strategic leadership advisory with huge clients, is a sequel to a popular FGS report that Jim VandeHei and I used as the basis for a series of popular "Behind the Curtain" columns before the 2024 elections.
- FGS bills "Alternative Futures: Beyond November" as a framework for processing the epic battles ahead: how power will get used, how both parties will evolve, and how business leaders can navigate the uncertainty.
- "The 2026 midterms will begin — not end — a 27-month period of unusually high strategic uncertainty," the report says.
Zoom in: Michael Feldman — FGS partner and co-chairman, North America — tells me that for Republicans, "intervention may mean tariffs, industrial policy, domestic manufacturing incentives, and other measures aimed at strengthening U.S. production capacity, economic security, and competitiveness."
- "For Democrats, intervention may mean affordability policies, labor protections, antitrust enforcement, plus regulation designed to reduce costs, curb concentrated corporate power and address inequality."
- "Everyone is focused on who controls Congress," Feldman added. "We think the more important question for business is what happens next. The midterms are the beginning, not the end, of a period of significant political and policy uncertainty."
Zoom out: Three structural shifts will drive the post-midterm operating environment for businesses of all sizes, FGS warns.
- "Voter dissatisfaction may be the most important force pushing both parties away from established policy orthodoxies. A frustrated electorate could push both parties toward more populist, interventionist and less predictable approaches to business."
- "Technological disruption could reshape the political agenda as profoundly as traditional partisan conflict. AI and related technologies are becoming a political variable — not merely a sector-specific policy issue."
- "Generational turnover will weaken established political assumptions even where ideology remains unchanged. The next generation of leaders may inherit existing parties without inheriting their relationships, orthodoxies or governing style."
The bottom line: "Divided government does not necessarily mean lower political/legislative risk," FGS writes. "It may mean that policy/political conflict moves in less predictable ways."