I. When Gridlock Isn't Good for Stocks
The US midterm elections will be over tomorrow night. According to betting markets, Democrats have roughly a 95% probability of winning the House and a 76% probability of taking the Senate (charts).
We suspect that stock investors have yet to fully discount the possibility of a Democratic sweep of Congress. Some may remain skeptical that polls confirming strong support for Democrats are accurate. They might reckon that Democrats are more likely than Republicans to talk to pollsters over the phone.
In any event, Wall Street traditionally welcomes political gridlock because it reduces the likelihood that Congress will pass extremist legislation. But this time could be different for two reasons.
