The U.S. midterm election season is entering its final stretch, and Wall Street is positioning for several possible outcomes. The scenario gaining traction among investors is a split Congress, with Democrats expected to win the House in November while Republicans hold a narrow edge in the Senate. Many market watchers see that combination as the least disruptive for markets because it would reduce the odds of major policy shifts.
That view is not settled. Prediction markets currently favor Democrats for control of the House, while the Senate race has tightened and Republicans are only slightly ahead on Kalshi and Polymarket. At the same time, futures linked to the Cboe Volatility Index show rising demand for protection against swings in the S&P 500 in early November. Evercore ISI has advised traders to use a straddle on the State Street SPDR S&P 500 ETF Trust to position for possible volatility. Markets also expect the Federal Reserve to deliver two rate hikes by early 2027, according to the report cited by Odaily from The Wall Street Journal.
The U.S. midterm election season has entered its final stage, and Wall Street is mapping out strategies for a range of outcomes. The setup that now looks both market-friendly and increasingly plausible is a split Congress: Democrats taking the House in November, with Republicans holding a slight advantage in the Senate.
Many market observers view that combination as the preferred outcome because it carries less risk of disruptive policy changes. Even so, confidence in that result is not absolute.
Prediction markets point to a divided outcome
Prediction markets currently favor Democrats to win control of the House. The Senate contest has become tighter, with Republicans only narrowly ahead on Kalshi and Polymarket.
At the same time, futures tied to the Cboe Volatility Index indicate rising demand for protection against S&P 500 volatility in early November.
Trading strategy and rate expectations
Evercore ISI has recommended that traders position for possible market swings through a straddle on the State Street SPDR S&P 500 ETF Trust.
Markets also expect the Federal Reserve to raise rates twice by early 2027.
The report was cited by Odaily from The Wall Street Journal.
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