Global stock markets recovered sharply after falling earlier in the day following the Democrats’ victory in both chambers of the U.S. Congress. The S&P 500 rebounded 2.18%, Nasdaq gained 3.13%, Dow Jones rose 2.16%, and Russell 2000 climbed 2.31%. Japan’s Nikkei 225 recovered 5.09%, while South Korea’s KOSPI gained 4.71% from their session lows. The recovery comes as investors assess the impact of the Democratic victory on Trump’s remaining two years in office. Democrats can block legislation and investigate the administration after January 3, 2027. However, Trump retains veto power, and Democrats lack the two-thirds majority needed to override it. This limits their ability to change Trump’s economic policies or restrict military action against Iran. Investors may be reacting to the possibility of political deadlock rather than major policy changes. A divided government could make it harder for either side to pass new legislation.

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