Wall Street expects a decisive midterm result. A contested count could test markets
Options traders are pricing the 2026 U.S. midterm elections as a relatively routine event with a clear outcome — but a delayed result following the Nov. 3 poll could surprise markets already on edge over rising government borrowing costs and AI jitters, according to Man Group . Ahead of next week’s vote, traders are working on the assumption that the election will see a decisive Democratic victory, Man said. The world’s largest publicly traded hedge fund and alternatives group calculated S & P 500 options to price about 1.2 times a typical day’s volatility for Nov. 4 — the day after the midterms. That’s about 20% larger than usual, though a level broadly in line with previous midterm elections. Man said this move is about half the size typically priced around a presidential election, while tech earnings, U.S. inflation data, and the next Fed meeting would be expected to cause slightly less volatility. @SP.1 3M mountain S & P 500 Futures. Recent Polymarket odds, cited by Man, give the Democrats a 66% chance of winning both the House and Senate, with chances of a Republican sweep at just 8%. Odds and gambling platforms do not use methodologies used by traditional political polling, and therefore are not substitutes for political polls. How the result could swing markets A decisive sweep for the Democrats would likely boost healthcare and retail stocks. Conversely, it could weigh on capital markets stocks such as investment banks and brokers, and, to a lesser extent, aerospace and defense names, according to Man Group’s analysis. A Republican-sweep basket would likely herald the reverse market outcome, Man added. But a delayed result could upend bets on certain stocks and sectors priced to do well on a clear result, further rattling already-on-edge markets. “The market is pricing the midterms as a largely ordinary event, on the assumption that the result is known on 4 November. That assumption carries a risk, though,” Adam Keogh, quantitative researcher, systematic at Man Group, said in a note Oct. 27. “Control of a chamber can hinge on a handful of close races that in the past have taken weeks to resolve, and the options market shows few signs of accounting for this.” .VIX 1M mountain CBOE Volatility Index. Keogh pointed to the 2022 midterms — which took until December to know the final composition of the Senate — and the 2020 Senate election, when control of the Senate was not determined until after the Georgia runoffs in January, two months after election day. “Today, with government borrowing costs at levels not seen in many years and AI jitters running high, it is unclear whether markets would have the same capacity to look through such a shock, in the unlikely event that a contested count escalated.”
