- Investors ran for cover as the results came in. The 10-year Treasury yield dropped nearly 5 basis points to 4.902% and the 2-year yield fell 6 basis points to 4.55% overnight as investors sought shelter from a sell-off in equity futures, after The Associated Press projected Democrats would win both chambers of Congress. By Wednesday morning the 10-year was about 1 basis point lower at 4.93%.
- Wall Street’s fear gauge crossed a key line. Futures on the Cboe Volatility Index climbed to 20.90 on Tuesday evening, above the 20 level that tends to signal heightened investor angst. Trump Media & Technology shares fell more than 7% in overnight trading on Robinhood after CNBC’s Election Desk projected Democrats would win the House.
- The shock traveled overseas. Japan’s Nikkei 225 plunged 4.45% to its lowest level since May and the Topix fell more than 3%, with SoftBank Group down more than 8% and chip equipment maker Disco off 10.19%, as investors weighed tighter limits on AI infrastructure under a Democratic Congress. Futures on the UK’s FTSE 100 fell 0.64% and Germany’s DAX 0.46% ahead of the European open.
- Some traders positioned for winners, and history favors patience. The Invesco Solar ETF (TAN) rallied 3% in Tuesday’s session and another 1.3% after hours, with options volume running 40 times higher than usual and 99% of the more than 20,000 contracts traded by midday being calls. A CNBC analysis found the S&P 500 has risen in the year after each of the last 11 midterm elections from 1982 to 2022, returning 13.7% on average.
What Happened?
Equity futures opened higher on Tuesday evening, with S&P 500 futures up 0.2% and Nasdaq-100 futures up 0.5%, before turning lower as projections pointed to a Democratic sweep of the House and Senate. Treasury yields fell across the curve, with the 30-year yield sliding to 5.29% overnight before settling around 5.31% on Wednesday morning. President Donald Trump responded on Truth Social late Tuesday: “I wasn’t on the Ballot and if I was, we would have won IN A LANDSLIDE!” Asian chip stocks led regional losses, with Advantest down more than 8%, Tokyo Electron down 7.04% and SK Hynix down 5.08%.
Why It Matters?
The bond move is the cleanest read on how markets view the result: investors bought Treasuries as a haven while equity futures sold off. The 2-year yield fell slightly more than the 10-year, leaving the 2s10s spread at roughly 35 basis points on the overnight readings, by our calculation from CNBC’s figures. The solar options frenzy shows traders are already trying to pick sector winners from Democratic control, after a five-month sell-off in the group. With VIX futures above 20, the near-term setup is one of elevated volatility rather than panic.
What’s Next?
Edward Jones senior strategist Angelo Kourkafas said the results “could act as a clearing event removing some uncertainty,” and that any election-driven volatility “may present an opportunity for long-term investors to lean into it.” He added that AI and geopolitics, not the election, remain the primary forces driving markets into the final two months of the year. The historical record supports that view: CNBC’s analysis of elections from 1980 through 2024 shows the S&P 500 rising an average of 1.1% in the month after an election and gaining in 91% of cases one year out. Investors will watch whether the VIX holds above 20 and whether Treasury yields keep falling once US cash trading opens.
Affected Tickers and Coins: SPY, QQQ, TAN, DJT, TLT
Source: CNBC
