Options traders don't seem to be uneasy about the US midterm elections, which has exposed the stock market already affected by bond sell-offs and uncertainty about the Fed's interest rate path to potential risks. According to data compiled by Barclays, the S&P 500 index is expected to fluctuate 0.8% on November 4, the day after the midterm elections. According to Kalshi data, the gaming market believes that the probability of the Democratic Party winning in both houses of the National Assembly is 62%, while the probability of the National Assembly splitting is about 29%, that is, the Republican Party holds the Senate and the Democratic Party wins the House of Representatives. Investors are downplaying election risks in part because the market still expects a “split government.” This situation usually leads to a legislative impasse, thereby reducing the risk of significant market fluctuations. However, as voting approaches, volatility is likely to rise again, and the possibility that the election results will be chaotic cannot be ruled out. Wells Fargo strategists said that at least for now, traders expect this midterm election to be a “non-incident.” Strategists at J.P. Morgan Chase, including Dubravko Lakos-Bujas, believe investors should prepare for this situation to change. They pointed out that although other macro risks such as interest rates, fuel prices, and the impact of artificial intelligence are “shrouding over the market,” implied volatility is still low.

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