Investors ready for possible shake-up in Congress as US awaits election results
SPY•Investors braced for a potentially strong Democratic showing in the midterm elections, which could affect market-sensitive areas including AI data-center investment, fiscal policy and regulation. Prediction markets implied a 94% chance Democrats would win the House and a 74% chance they would win the Senate on Tuesday.
1. Election uncertainty
Investors were bracing for a potentially strong Democratic showing in Tuesday’s midterm elections, which could affect the AI data-center buildout, the US fiscal outlook, defense spending and regulation in healthcare, banking and cryptocurrencies. Prediction market prices implied a 94% chance of Democrats taking the House and a 74% chance of winning the Senate as of 4:23 p.m. ET.
2. Markets and volatility
The S&P 500 rose 0.4% on Tuesday, helped by a rebound in recently hit AI and technology stocks. The 10-year Treasury yield rose to 4.96%, while the dollar edged higher. Options traders were bracing for a 1% move in either direction for the S&P 500 on Wednesday, above the 0.6% average implied daily move over the past month.
3. Potential policy effects
Investors were watching for greater scrutiny of AI companies and possible investigations into the technology sector if Democrats take control of Congress. Analysts saw slim chances of legislation that would severely undermine the data-center buildout. Scott Chronert of Citigroup said the market reaction was likely to be positive if Republicans retained the Senate and negative if Democrats gained a greater-than-expected foothold there.
