Market Risk and Midterm Elections: Eyes on the Senate

Midterm elections are next week on November 8 and turnout is expected to be high. It is also the day of the November full moon, which is called the Blood Moon. There will be a total lunar eclipse. What could go wrong?

I expect Republicans to take the House

For some time I have believed the Republicans will take control of the House, and this continues to be my high-conviction call. Based on current polling, I estimate the Republicans’ net gain could be in the range of 20 to 30 seats.

If Democrats keep the House, it would break historical precedent as well as current polling and therefore likely shake up the markets.

While some individual seats may be uncertain, by dawn on Wednesday, November 9, we should know who took control of the House.

It’s a different story for the Senate elections.

Senate control too close to call

Earlier this year, I believed there was roughly a two-thirds chance that Democrats would hold the Senate. However, movements in polling and prediction markets have changed those odds. I now put the control of the Senate at a coin-flip.