Wall Street bets a divided US Congress is the best market scenario as midterm election season enters its final stretch

Odaily News: The US midterm election season has entered its final stage, and Wall Street is busy devising strategies for a range of scenarios. However, by a stroke of luck, the outcome that is best for markets also appears to be the most likely. Investors are growing increasingly confident that Democrats will take the House in November, while believing that Republicans hold only a slim advantage in the Senate. In the view of many market observers, this is the most ideal combination with the least disruptive policy risk. Although confidence in this outcome is not unfounded, it is far from a sure thing.

Prediction markets currently favor Democrats winning control of the House. However, the Senate race has become more of a toss-up, with Republicans currently holding a slight lead on Kalshi and Polymarket. Futures markets tied to the Chicago Board Options Exchange Volatility Index show rising demand for protection against S&P 500 volatility in early November. Evercore ISI recommends that traders position for potential market swings by using so-called straddle option combinations on the State Street SPDR S&P 500 ETF Trust. (WSJ)