The 2026 midterm elections have fundamentally changed the national regulatory environment, with Democrats securing control of both chambers of the U.S. Congress. This political shift included significant victories in traditionally business-friendly states such as Texas and South Carolina. Over the past two decades, Southern states like Florida and Texas have attracted massive corporate migration from blue states due to lower taxes and less regulation. Many individuals also relocated to these areas for lower housing costs and better economic opportunities. With the new political landscape, these relocated companies now face an environment focused on energy constraints, building limitations, and tighter legislative oversight.
The information technology, semiconductor, and traditional energy sectors encountered immediate headwinds following the election. Companies leading the artificial intelligence boom, including CoreWeave, Tesla, and SpaceX, saw their share prices decline as markets adjusted for tighter Democratic regulatory oversight. There are growing concerns that potential restrictions on AI deployment could slow down the fastest-growing area of the U.S. economy. Senator Bernie Sanders recently highlighted his efforts to advance a data center moratorium proposal, which he co-authored with New York Congresswoman Alexandria Ocasio-Cortez.
Market participants are now realizing that regulatory friction may increase significantly for over half of the U.S. hyperscale data center pipeline. Developers building new facilities may face tax increases, strict mandates to bring their own power, or new air-permit delays for on-site gas plants. These factors are causing construction costs to rise and timelines to extend, which in turn increases the immediate demand for advanced chips down the hardware supply chain.
In the energy sector, traditional oil and gas majors saw their stocks fall, while solar and green energy shares surged on expectations that a Democratic Congress will resume pushing for subsidies. Although the ongoing conflict between the U.S., Israel, and Iran initially drove crude prices higher, the shift in Congress altered the political calculus. President Trump now faces a legislative body that can constrain military options and push back on defense budgets. This dynamic led to a plunge in crude prices, with Brent crude dropping below $95 per barrel.
Defense contractors also took market hits due to anticipated congressional resistance to the $1.5 trillion Pentagon budget. Meanwhile, healthcare and grocery stocks, including Walmart, Costco, Kroger, and Dollar General, remained above pre-election levels. Investors expect a Democratic Congress to boost federal spending in these areas. This outlook helped explain why Costco was one of the few stocks to close higher on Thursday.
Costco also ranked as the 15th most active single-stock option in notional terms, surpassing names like JP Morgan, Marvell, Oracle, Eli Lilly, and Dell. At roughly 46 times forward earnings, Costco is not cheap, though the average forward multiple for the sector is slightly higher at over 49 times. Most trading activity involved short-dated call options. Because the stock price was over $1,065 as of Thursday's close, a standard round lot of 100 shares would cost over $100,000 to buy outright.
Call options allow investors to gain exposure to 100 shares for a fraction of the cost of buying the shares directly. For example, buying the January 1060 calls cost about $53.45, or $5,345 for upside participation on 100 shares above the $1,060 strike price. Some traders are looking at technical resistance levels, noting that Costco topped out at about $1,090 in mid-May. By selling a call at or near that level, such as the January 1090s at 39.65, investors can reduce the cost of the trade to $13.80, which is just under 1.3% of the current stock price.
While $1,380 is a significant outlay for a one-lot call spread on a stock trading at 46 times forward earnings, the cost is comparable to other premium items at the retailer. This strategy provides participation in 100 shares of Costco between the strikes for only 30% more than the cost of a single share of the underlying stock.
