Archive · 11 Aug 2026
Morgan Stanley Warns Energy Prices Could Shape 2026 US Midterms
There is a big voting day coming in the United States in 2026.
Experts at a company called Morgan Stanley studied how prices affect elections.
They found that people care a lot about what things cost, like gas for cars and electricity for homes.
Prices are still going up faster than they did before the pandemic, which makes life feel more expensive.
High energy prices mean people have less money to spend on other things.
That can be a problem for the political party in power, because voters often blame them.
In the past, when gas prices went up before elections, the president's party lost many seats.
Helping families with money could make voters happier, but it might also make prices go up even more.
So leaders need to be careful about how they help, because there is not much time before the election.
Morgan Stanley warns that energy prices and inflation could be key factors shaping the 2026 US midterm elections.
July's consumer price index showed US headline inflation at 3.5% year on year.
Since 1978, midterm cycles with rising gas prices have coincided with an average loss of 32 House seats for the incumbent party, versus six seats when gas prices fell.
Morgan Stanley cut its US economic growth forecast by roughly 0.3 to 0.4 percentage points because of higher energy prices.
Morgan Stanley says Congress faces fiscal, legislative, timing and implementation constraints that limit large-scale relief before the vote.
- Who
- American voters, the president's party in Congress, and analysts at Morgan Stanley Wealth Management, including Global Chief Economist Seth Carpenter and Head of Public Policy Research Ariana Salvatore.
- What
- An analysis warning that energy prices and the cost of living could be key factors shaping the 2026 US midterm elections.
- When
- Ahead of the 2026 US midterm elections, drawing on July's consumer price index data.
- Where
- United States
- Why
- Higher energy prices and inflation weigh on household budgets and are historically associated with losses for the president's party in midterm elections.
Supporters of household relief
Morgan Stanley's caution
Fiscal relief before the election
Supporters of household relief
Targeted measures such as SNAP benefits, energy subsidies and tax rebates could offer meaningful relief to households facing the greatest affordability pressures.
Morgan Stanley's caution
If that support keeps consumer spending strong while energy prices stay elevated, it could push inflation up again, potentially forcing the Federal Reserve to raise interest rates.
What will decide the midterms
Supporters of household relief
Voters experience the economy through everyday prices such as gasoline and electricity, making cost-of-living pressures highly visible and politically important at the ballot box.
Morgan Stanley's caution
Candidates, political campaigns and control of Congress will inevitably shape the outcome, and broader factors such as historical trends and legislative battles also matter.
Direct payments from the White House
Supporters of household relief
The White House could bypass Congress and send money directly to households to provide quick relief.
Morgan Stanley's caution
Spending power resides in Congress under a firm constitutional boundary, and direct payments without congressional authority could face legal challenges before the money is fully distributed.
- July headline inflation
- 3.5% year on year (consumer price index)
- 2026 GDP growth forecast
- 2.3%, versus 2.1% in 2025
- Growth forecast cut
- About 0.3-0.4 percentage points due to higher energy prices
- Average House seat loss when gas prices rose
- 32 seats for the incumbent party (since 1978)
- Average House seat loss when gas prices fell
- 6 seats for the incumbent party (since 1978)
- Wholesale electricity price rise near data centres
- 267% from 2020 levels, versus 30% nationally
- S&P 500 average gain after midterms
- 13% in the 12 months following midterm elections
- Fed policy expectation
- Rates kept steady through the end of the year