Man Group says options traders are pricing in the 2026 U.S. midterm elections as a relatively routine event with a clear outcome, but a delay in results after the Nov. 3 polls could spook a market already nervous about rising government borrowing costs and concerns about AI. Mann said traders are working on the assumption that Democrats will win decisively in the election ahead of next week’s vote. The world’s largest publicly traded hedge fund and alternatives group calculated the price of S&P 500 options on Nov. 4, the day after the midterm elections, to be about 1.2 times the normal daily volatility. That’s about 20% higher than normal, but about the same level as the last midterm election. Mann said the move was about half the usual size that factored in the presidential election, but volatility was expected to be slightly lower based on tech company performance, U.S. inflation data and the next Fed meeting. @SP.1 3M Mountain S&P 500 Futures. According to recent polymarket odds cited by Mann, Democrats have a 66% chance of winning the House and Senate, while Republicans have just an 8% chance of winning an overwhelming majority. Odds and gambling platforms are not replacements for political polls, as they do not use the techniques used in traditional political polls. What this outcome means for the market A decisive Democratic victory would likely boost health care and retail stocks. Conversely, it could weigh on capital markets stocks such as investment banks and brokers, and to a lesser extent aerospace and defense stocks, according to Man Group analysis. Mann added that if Republicans win a sweeps basket, it would likely cause a market reversal. But delayed results could upend bets on certain stocks or sectors that were expected to perform well with a clear outcome, further roiling an already tense market. “Markets are pricing in the midterm elections as a near-business-as-usual event, based on the assumption that the results will be known on November 4,” Adam Keogh, a systematic quantitative researcher at Man Group, said in an Oct. 27 note. “However, there are risks to that assumption.” “Controlling the floor has historically depended on a small number of close races that took weeks to resolve, and options markets have shown little sign of accounting for this.” .VIX 1M Mountain CBOE Volatility Index. Keough pointed to the 2022 midterm elections, in which the final composition of the Senate took until December to be known, and the 2020 Senate election, in which control of the Senate was not decided until after the Georgia runoff elections in January, two months after Election Day. “With government borrowing costs currently at levels not seen in many years and AI concerns rising, it is unclear whether markets would have the same ability to weather such a shock if the tally dispute were to escalate.”
