Société Générale sees Democratic House and toss-up Senate in midterms

Democrats are strongly positioned to win control of the House in November, while the battle for the Senate remains too close to call, according to a new election model from Société Générale.

The model assigns a 44% probability to Democrats capturing both chambers. It puts the likelihood of a Democratic House and Republican Senate at 43.3%, chief U.S. economist Jan Groen said in a Sept. 18 report.

The remaining probability largely reflects the possibility that Republicans retain unified control.

All 435 House seats and 35 Senate seats will be contested on Nov. 3. Republicans currently hold a 218-214 advantage in the House, meaning Democrats need a net gain of three seats. In the Senate, Republicans hold a 53-47 majority and Democrats need to gain four seats because the vice president can break a 50-50 tie.

Difficult Senate map

The national political environment resembles a Democratic wave, but the Senate map gives Republicans some protection. Democrats must compete in several states that have leaned Republican in recent presidential elections.

Société Générale’s model focuses on nine competitive races: Alaska, Georgia, Iowa, Maine, Michigan, New Hampshire, North Carolina, Ohio and Texas.

The model combines analyst ratings, polling and prices from the Kalshi KALSHI and Polymarket POLYMARKET prediction markets. It also uses simulations based on historical polling errors. Polls receive more weight as Election Day approaches, while the influence of prediction markets depends partly on contract liquidity.

That approach produces a more cautious outlook than betting markets, which currently favor Democrats to gain the four seats needed for Senate control.

Recent national polls indicate strong Democratic momentum. A New York Times/Siena College poll showed Democrats leading the generic congressional ballot by 8 points. An Economist/YouGov survey put the advantage at 12 points.

Texas, Alaska emerge as pivotal races

Texas is shaping up as one of the country’s most expensive Senate contests. Republican groups have committed more than $50 million to support Ken Paxton in his race against Democrat James Talarico.

Recent polls show a close contest, with some putting Paxton behind. Concerns about affordability and President Donald Trump’s standing among Hispanic voters have helped Democrats remain competitive.

Prediction markets are more optimistic about Talarico’s chances than the Société Générale model. The bank’s framework incorporates older polls at reduced weight, while market prices react more quickly to recent surveys and investor sentiment.

Alaska also has become an unexpected battleground. Former Democratic Rep. Mary Peltola is challenging Republican Sen. Dan Sullivan in a state where Democrats haven't won a Senate election since 2008.

Recent state polling suggests a competitive race. The presence of another candidate named Dan Sullivan also could create confusion under Alaska’s ranked-choice voting system.

Why the outcome matters for investors

Either of the two most likely outcomes would restrict the Trump administration’s fiscal agenda. A Democratic House could increase oversight and produce tougher negotiations over spending bills and the debt limit.

A Democratic sweep would create greater uncertainty around government funding and raise the risk of shutdowns. It also could complicate the confirmation of Federal Reserve officials, federal judges and any potential Supreme Court nominee.

By contrast, a Republican Senate paired with a Democratic House would preserve the administration’s ability to confirm nominees. Trade policy also would remain largely under executive control.

For investors, the Senate result may therefore matter more than the widely expected change in the House. It will influence personnel at the Fed, the direction of fiscal policy and the severity of possible funding disputes. It also could affect market expectations for tariffs, regulation and government borrowing.

Affordability remains dominant issue

Groen identified energy costs, tariffs, artificial intelligence and data centers as major issues that could determine the closest races.

Volatile fuel prices following the Iran conflict have added to household expenses and inflation concerns. Renewed trade tensions between the U.S. and Canada also have raised costs for consumer products, industrial goods and agricultural inputs.

The AI investment boom has supported construction and capital spending. However, the rapid expansion of data centers has become a political issue as their electricity demands put pressure on utility bills and power grids.

New York Times/Siena polling found that voters trusted Democrats more on healthcare, the deficit, the cost of living, the economy, immigration and foreign policy. Republicans held a slight advantage on AI.

Société Générale plans to update its election model weekly through the midterms. For now, its central conclusion is that a Democratic House is highly likely, but control of the Senate remains a coin flip.