Markets have largely priced in a Democratic takeover of the House, analysts say....
However, investors might not react as kindly to a surprise. A substantial Democratic victory in the Senate, as well as the House, might provoke a brief sell-off, according to Ron Brown, chief investment officer at Genworth Financial Asset Management. "The market could use that as an excuse to have a hiccup," Brown says.
The effects of a Democratic sweep would likely reveal themselves on the sector level, rather than across the broad market, some analysts say. Investors might be worried, rightly or wrongly, about possible Democratic legislation hampering health-care companies, defense contractors, or Big Oil, says Brian Gendreau, investment strategist at ING Investment Management.
Meanwhile, a divided government might not be as bullish as some investors hope, other analysts say. "Gridlock is a positive if there's nothing that needs to be done," says Barry Ritholtz, chief market strategist at Ritholtz Research. "We're in a situation where there are a lot of issues that should be addressed sooner rather than later."
Those are the real markets, where people have been betting for months that Democrats will win and staunch the hemorrhaging. But markets remain in real dollar terms way, way below 2000. In the Election Futures market,
The Iowa Electronic Markets were offering strong odds that Republicans will lose control of the House of Representatives but hold onto the Senate. In afternoon trading, prices on this University of Iowa futures market for betting on election results suggested an 82% chance Democrats will win the House and only a 31% chance Republicans would lose the Senate.
What's fascinating is that the trend toward predicting a Republican loss of both House
has been rising.
Whether this happens or not depends on who takes the time and effort to go to the polls.