In the US system, Congress writes laws, but the president gets the final word on whether most of them take effect. That final word is the veto. It is one of the main reasons that a change in control of Congress does not automatically lead to big policy shifts, and it is why markets often look at the whole of Washington, not just one election result, when judging what might change.
What a veto is
When both the House of Representatives and the Senate pass a bill, it goes to the president. The president can sign it into law or reject it with a veto, sending it back to Congress with objections. If the president does nothing for ten days while Congress is in session, the bill becomes law without a signature. If Congress adjourns during that time, the bill can die, which is known as a pocket veto.
Overriding a veto
Congress can override a veto, but it is hard. It needs a two-thirds majority in both the House and the Senate. That usually requires support from members of the president’s own party, which is rare on contentious issues. Historically, only a small share of vetoes have been overridden.
Why markets care
The veto acts as a brake on big changes when the White House and Congress are controlled by different parties. Suppose a new Congress wants to raise corporate taxes or tighten regulation on a particular industry. If the president opposes those plans, a veto can block them. That is why markets have often been reassured by divided government, as we explain in our guide to political gridlock.
It also explains why first reactions to election results can be exaggerated. Traders may sell on the headline that a party opposed to the president has taken Congress, as happened after the 2026 US midterms covered in our Morning Market Brief. Once they remember that the president can still block legislation, some of that move may reverse.
Where the veto matters less
The veto does not cover everything. The government still needs Congress to approve spending each year, and the debt ceiling must be raised from time to time. If neither side gives way, the result can be a government shutdown or a tense borrowing stand-off rather than a clean veto. In those cases, the risk for markets is not new laws, but disruption caused by laws not being passed.
Presidents also have powers that do not need Congress at all, such as some trade measures and executive orders. These can move markets even when legislation is blocked.
The beginner’s takeaway
The presidential veto lets the president block laws passed by Congress, and overriding it needs a two-thirds majority in both chambers. It limits how much policy can change under divided government, which is one reason markets often settle after an initial political shock. Knowing how it works helps you judge what can realistically change after an election.
Understanding how political systems shape markets is part of thinking like a professional. To see where your knowledge stands, take the free Samuel & Co Trading Trader Assessment.
