Time to straddle midterm volatility

With the summer all but over, strategists are turning their attention to the big event of the year — the November 3 midterm elections. With 35 Senate seats and all 435 House of Representatives seats up for grabs, strategists at Evercore ISI, including Julian Emanuel, are preparing for some volatility and uncertainty.

Emanuel, managing director leading the firm's equity, derivatives & quantitative strategy team, was the lead author of a note pointing out on Monday that the midterms "are generally unkind to the party in the White House." While the average is a loss of about 28 House seats, he notes that President Donald Trump's Republican party lost 41 in 2018 while Biden's Democrats lost nine seats in 2022.

And with the Republicans currently holding a narrow 219-seat House majority and a 53-47 majority in the Senate, Emanuel writes that everything is "in play" with the Democrats widely expected to reclaim the House while expectations are less clear for the Senate.

But whatever happens he notes that when the party controlling one or both branches of Congress is not the same as the party of the sitting President, this causes uncertainty for the market.