# U.S. Midterms Put Spending and Sovereign Debt Risks in Focus

By Enna Lee

Canonical URL: https://www.tokenpost.com/news/investing/46399
Published: 2026-11-02T12:29:24.000Z
Updated: 2026-11-02T12:29:24.000Z
Section: Investing

> Seth Carpenter highlights different fiscal constraints across the United States, Brazil and France, including mandatory spending above 91% of Brazil’s government outlays.

Seth Carpenter, Morgan Stanley’s chief global economist, sees the U.S. midterm vote, Brazil’s budget rigidity and France’s deficit plan as distinct tests for investors weighing spending and sovereign borrowing.

Carpenter says a divided U.S. government would be unlikely to change broad economic policy significantly. A major shift in congressional control could reverse some domestic spending cuts and modestly boost growth. Restrained military spending could offset that growth boost.

More than 91% of Brazil’s government spending is mandatory, leaving limited room for a major fiscal adjustment. Carpenter says an election could change specific fiscal policies, but the spending structure makes a substantial shift difficult. He also flags a moderately restrictive credit cycle as a risk markets may not have fully priced in.

In France, current budget proposals would only stabilize the deficit, Carpenter says. He sees higher taxes as a potential drag on growth and spending cuts as a risk to economic activity. French borrowing costs are already elevated, in Carpenter’s assessment.

U.S. midterm voting is scheduled for Tuesday, Nov. 3.