It's finally Election Day - and prediction markets may show 'too much confidence in a good night for Democrats'

By Victor Reklaitis

Here's what's expected in the battles for control of the House and Senate

Americans who haven't voted early are heading to their polling places today, as investors wait to see if this Election Day will provide clear outcomes in the battles for control of the House and the Senate.

Election Day has arrived at last, and results for the midterm elections will start trickling out tonight.

So what's expected?

Democrats are widely viewed as likely to take back control of the U.S. House of Representatives by winning a majority of seats in that chamber of Congress, while President Donald Trump's Republican Party has more of a chance of keeping its grip on the Senate.

Democrats' likelihood of capturing the House was around 94% or 95%, as of this morning. That's according to prediction market Kalshi and rival Polymarket, respectively. (Polymarket has a data partnership with MarketWatch's publisher, Dow Jones.)

Democrats' chances of taking back the Senate were at 77% on Kalshi and 78% on Polymarket. The decisive races in the fight for a Senate majority probably will be the six rated as "toss-ups" by Cook Political Report analysts - Alaska, Iowa, Kansas, Maine, Ohio and Texas - along with Michigan's contest, which CPR had rated as a "toss-up" up until Monday, when it switched to "leans Democratic."

Yet prediction markets may be leaning too far in favor of Democratic candidates in the final days of midterm campaigning, according to Brian Schaffner, a professor of political science at Tufts University with an expertise in public opinion.

"Both the House and Senate predictions seem a bit more bullish on Democrats than the prominent forecast models out there," Schaffner told MarketWatch in an email.

"In particular, I see the Senate outcome as a bit more of a toss-up than the markets do," he added. "In general, the markets seem to be following the polls and forecast models, but a bit more decisively, which runs the risk of suggesting too much confidence in a good night for Democrats."

Some analysts that track Washington for Wall Street also aren't convinced that the Senate will flip to the Democrats. Henrietta Treyz at Veda Partners said in a note on Monday that "contrary to conventional wisdom, I still expect Republicans to narrowly hang on to the U.S. Senate with a 50-50 split and Vice President J.D. Vance breaking any ties."

Republicans currently have a slim 219-214 majority in the House, along with a 53-47 majority in the Senate.

Prediction markets don't have perfect track records. In the 2022 midterms, they suggested a red wave was approaching, but voters instead delivered a red ripple, as Republicans won just a slim House majority and didn't take the Senate. A week ago, betting markets had Brazilian politician Flávio Bolsonaro as a strong favorite to win that country's presidential election, but incumbent Luiz Inácio Lula da Silva actually won.

Related: A bigger-than-expected win for Democrats in the midterms could deliver 'short-lived weakness' for stocks, strategists say

Will we have to wait a while?

One problem for President Trump's Republican Party is that midterm voters are frustrated with how his war on Iran has led to higher gasoline prices. Critics have put stickers like the one shown here on gas pumps.

Investors are waiting to see if this Election Day will provide clear outcomes in the battles for control of the House and the Senate, or if there will be a few days of vote-counting required - as happened with 2024's contest to capture the House and 2022's fight to run that chamber. In 2020, the presidential election took days to call, and Senate control wasn't determined until two months later.

Many analysts have been predicting losses for the GOP because of voters' frustrations with elevated prices for gasoline and other essentials. In addition, midterm elections have been bruising for most modern presidents.

Voters aren't picking a president today, but the outcome of the midterms still is important for fuel prices, taxes (including tariffs), healthcare expenses, housing costs and the artificial-intelligence boom.

-Victor Reklaitis

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

11-03-26 0826ET