Key Highlights

● Prediction markets gave Democrats a 91.3% to 93% chance of winning the House.

● Democrats need a net gain of four Senate seats for a majority.

● The S&P 500 was higher 12 months after all 19 midterms since 1950.

● VIX was quoted near 18.60 before Friday's open, with November futures at 19.21.

With four days to go before the Nov. 3 midterm elections, markets have largely made up their minds about the House. The open question for investors is the Senate, and what a shift in Washington would mean for tech, energy and interest rates.

What the odds say

All 435 House seats and 35 Senate seats are on the ballot. Republicans hold 53 Senate seats, so Democrats need a net gain of four for a majority, since Vice President JD Vance breaks 50-50 ties. As of Oct. 29, prediction market Kalshi gave Democrats a 91.3% chance of winning the House and Polymarket 93%, according to one broker's analysis.

The Senate is less certain. As of Oct. 21, Kalshi priced a Democratic sweep of both chambers at about 66%, a Democratic House with a Republican Senate at about 27%, and a Republican sweep at about 9%. Democrats lead the generic ballot by about 9 points, and the president's approval rating is near 37%. In Michigan's open Senate race, Democrat Abdul El-Sayed leads Republican Mike Rogers by 2 to 7 points in recent polls, and Kalshi gave him a 71% chance.

How it could hit stocks

The broker's analysis argues that a Republican sweep would be the biggest surprise relative to market pricing and could lift Treasury yields and the dollar. A split Congress could limit large spending bills, which may offer modest relief for some cyclical stocks, it said.

The AI trade is the sharpest pressure point. One market strategist told media reports that a "blue wave" would be "negative for both the AI names." That warning lands as Nasdaq-100 futures are down about 2.6% Friday on Amazon (NASDAQ:AMZN)'s and Intel (NASDAQ:INTC)'s results, and as the Nasdaq heads for a losing October.

Energy is another flashpoint. Brent Crude is near $117.80 a barrel on Hormuz tensions, and reports suggest US strikes on Iran could resume after the vote. President Trump said in September that oil prices would be "tumbling downward" after the election, according to the broker's analysis. On whether he would accept the results, he said on Oct. 27: "I will if they're honest."

What history says

Midterm years have historically been rough until the vote and better afterward. The S&P 500 was higher 12 months after all 19 midterms since 1950, with an average gain of about 15%, according to the same analysis, though the sample is small. Fourth-quarter returns in midterm years averaged 6.6%. The average midterm-year peak-to-trough drawdown has been about 16%.

Volatility often fades after Election Day. The analysis notes that the VIX has tended to rise into October and fall around the vote in midterm years since 1990. This year, the VIX closed Thursday at 17.20 and was quoted near 18.60 before Friday's open, with November VIX futures at 19.21, a premium that reflects the election, the jobs report and Iran. The reaction can go either way: the S&P 500 rose 2.1% the day after the 2018 vote and fell 2.1% after the 2022 vote.

What to watch: first polls close at 6 p.m. ET Tuesday, and California counts mail ballots arriving through Nov. 10, so some races may take days to call. A possible Georgia Senate runoff on Dec. 1 could prolong uncertainty. The vote also comes ahead of a Dec. 11 government funding deadline, which a new lame-duck Congress will have to address, and the Fed's Dec. 9 decision, where markets price about an 85% chance of a hike.