NEW YORK — Wall Street braced for change with the election of Democratic Socialist Zohran Mamdani as New York City mayor on Tuesday, a win set to reverberate through the heart of global capitalism, with financiers worrying the city’s competitiveness and business appeal could suffer.

Decisive Democratic victories in Virginia, New Jersey and the passage of a California redistricting measure also signal Democrats could win back the U.S. House of Representatives in next year’s mid-term elections, investors and analysts said.

Mamdani’s win “will be an interesting experiment and we’ll see how much he tries to really change New York City,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. Looking collectively at the New York City, New Jersey and Virginia elections, Ghriskey said, “It’s a fairly strong mandate against the administration in Washington.”

Republicans hold the presidency and majorities in both the Senate and the House. If Democrats retake control of just one of those chambers next year, Washington gridlock could ensue, making policymaking more predictable – an outcome investors have often favored.

Democrats may be emboldened to stand firm on the ongoing U.S. government shutdown and negotiate harder on cryptocurrency legislation and energy permitting reform, Brian Gardner, chief Washington policy strategist at Stifel, wrote in a note on Wednesday.

New York Affordability Campaign

Mamdani focused his campaign on affordability. His agenda includes a rent freeze for rent-stabilized apartments, free bus services, universal child care and city-run grocery stores. He has proposed hiking taxes on New York City’s wealthiest people and raising the corporation tax.

New York’s mayor has no direct oversight over Wall Street, but the role plays into perceptions of whether the city is business-friendly.

“We are seeing a brand new day in New York City,” said David Funk, executive director of the American Real Estate Society.

“There would be real concern about the real estate housing industry’s appetite for significant investment in New York,” if Mamdani pursues his promised rent controls, Funk added.

While many financiers say they sympathize with the affordability issues Mamdani has raised, they expressed misgivings about his tax policies.

“When I look at the economics around the cost of living in New York City and when a one-bedroom apartment in New York City is $5,000 a month, that’s unsustainable,” Phil Blancato, chief market strategist at Osaic in New York, said after the results. “But when you think about the increase in taxes at the small-business level, corporate level … that has a significant impact.”

In his victory speech, Mamdani called out Republican President Donald Trump, whose celebrity is tied to the city, calling him a “despot.” Frank Marte, president of the Bodega and Small Business Group in New York, said inviting confrontation with Trump, who has sent federal troops to other Democratic-led cities, could jeopardize funding and ultimately harm New York.

“The people of New York, they will suffer,” said Marte, whose organization represents over 3,000 small businesses, including bodegas, hairdressers and mechanics.

Hope for Moderation

Some financiers hope Mamdani will moderate his positions. Others expect his agenda will quickly confront roadblocks.

While the mayor has power to advance policies affecting property owners, renewable energy, and immigration, Mamdani’s most transformative proposals, including raising taxes and wage floors, and freezing rents, are beyond unilateral mayoral control, Jefferies analysts wrote in a note late Tuesday night.

“Actual policy often turns out much more benign than campaign rhetoric, but if other major cities follow this pattern, markets may start pricing in more tax and regulatory risks,” said Dean Lyulkin, CEO of Cardiff, a private investment firm and small-business lender, ahead of the election result.

Some finance heavyweights, including investors Bill Ackman and Dan Loeb, funded efforts to defeat Mamdani, whose chief opponent was Andrew Cuomo, the former Democratic New York governor who ran as an independent. In a post on X, Ackman congratulated the mayor elect, adding: “Now you have a big responsibility.”

Other Wall Street leaders are focusing on how to work with him, and Mamdani has been engaging with business leaders. He spoke with CEOs in meetings organized by the Partnership for New York City, whose members include Wall Street banks, private equity firms and law firms, according to the organization’s CEO Kathryn Wylde.

Mamdani spokesperson Dora Pekec said the mayor-elect’s affordability agenda is good for the economy, as the child care provision will help businesses.

“It’s important that we have high quality of life for New Yorkers so that they want to keep starting businesses here,” Pekec said.

Potential Washington Gridlock

Analysts said other Democratic wins offer insight into how Americans are thinking about the shutdown and which political party is to blame. The most critical came in California, when voters approved a ballot measure to allow state lawmakers to adopt a new congressional map that could net the party as many as five new seats.

Betting website Polymarket shows a 72% chance of Democrats winning the House next year.

Analysts at Deutsche Bank said in a research note on Wednesday that the elections gave an early sign of “an anti-incumbent party swing ahead of the midterms…even if one has to be cautious in the read across from state to federal elections.”

Jamie Cox, managing partner at Harris Financial Group, said the election was a “very big wake-up call for Republicans.”

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(Reporting by Lewis Krauskopf; Additional reporting by Saeed Azhar, Matt Tracy, Siddharth Cavale, Maria Tsvetkova, Laura Matthews, Davide Barbuscia and Suzanne McGee; Editing by Megan Davies, Leslie Adler, Mark Porter, Rod Nickel)