• Contested election could add to AI-linked volatility
• Trump’s reaction could go either way for markets
• Anthropic IPO critical for sentiment amid febrile conditions

With US voters heading to the polls this week for the 2026 midterm elections, equity dealmakers and investors alike are praying for a smooth aftermath that can sidestep further market pain.

Global equity markets are reeling from a severe tech sell-off led by giant names like Intel and Alphabet – the former dropping almost 30% in one day on Friday 30 October, based on a disappointing sales outlook.

Alphabet lost over 13% of its value in the second half of last week after disappointing earnings that called into question whether the Google parent’s AI drive is cannibalising its search business.

The Nasdaq 100 is now around 9% below its most recent peak, set at the beginning of October, dangerously close to correction territory. The tech benchmark fell 3.46% on 30 October alone.

In this high-stress environment, markets are crying out for calm, and a rancorous US election is the last thing anyone needs.

Polls are pointing to the opposition Democratic Party making strong gains, likely retaking control of the US House of Representatives and possibly now the US Senate, although several races remain tight.

Markets are normally nervous around elections and, given the importance of the US as the world’s largest economy and its geopolitical prominence, American elections have outsized significance.

“For most investors there isn’t a horse that we are backing, we just need a vote where there isn’t a contested result and for Trump not to act negatively in response,” noted one ECM investor.

A tech coverage banker noted that historically markets tend to be constructive after the midterms. That’s usually been the case, but he noted there are fears this may not be the case this year.

“If there’s chaos, or an attempt to prevent senators from being seated or certified, or members of Congress from being certified, you can imagine situations where there are major fights between states and the federal government,” he said. “There’s potential for a messy post-election period.”

Potential pain for Treasuries, energy prices

A contested election could embroil the US in legislative deadlock ahead of the 11 December US government funding expiration, after which there will need to be a new budget or a continuing resolution agreed by Congress and President Trump to keep the US government funded.

There is also the matter of the US debt ceiling in 2027, with the US government set to hit its borrowing limit between “winter and mid-summer” next year, according to watchdog estimates.

A disputed election could prove disastrous to efforts to keep the federal government funded, or even more worryingly call into question the extension of the debt ceiling.

Even if a crisis were averted, the spectre of such legislative chaos could smash confidence in US Treasuries at a time it is sorely needed given recent spikes in global sovereign debt yields led by the US.

The other fear among investors and dealmakers is that Trump might lash out after a defeat for his party in other ways.

If the president loses control of his domestic agenda, he may decide to exercise his frustrations, or cement a legacy, in foreign policy, an area where US presidents have more authority to act without Congress.

“There are lots of things that can go wrong in the midterms and [that] makes it very difficult to have any conviction over the next couple of weeks,” said a second investor. “The main fear on our side is the possibility for a major escalation in the Middle East after the vote.”

Market participants noted that if Democrats gaining control of Congress proved to be an inhibitor to the president’s worst instincts and prevented him causing further damage to US trade or foreign policy, it could be a positive market catalyst, particularly if it meant the end to the war with Iran, helping to moderate energy prices.

“A situation that leads to Middle East de-escalation would be a huge market positive,” the second investor said. “There have been some heavily beaten-up sectors that could get a real leg-up from any move towards peace.”

Bull market in question

If we do see a spike in volatility after the midterms, it could not come at a worse time for global equity capital markets given the febrile mood around tech names.

Markets have been busy, but despite large placements getting across the line, investors have struggled for performance as volatility has risen.

On 26 October, Meta priced a USD 25bn accelerated trade on Nasdaq, the largest ABB in history, alongside a USD 12.5bn convertible, also the largest CB in history.

The stock has, however, failed to kick on after the block, closing at just below USD 615 each on Friday 30 October, around 1.6% below the offer price.

In Europe, large deals have also struggled to perform.

Shares in Schneider Electric have been volatile since it priced a EUR 6bn accelerated placement on 20 October at EUR 240 a share.

The stock was below the offering price on 30 October, trading at around EUR 238.80 apiece.

“Markets have been very volatile since the summer and it has been very difficult to bank alpha in capital markets since then,” said the second investor, citing poor deal performance.

Add that to a host of cancelled IPOs, including the US listings of smart-ring maker Oura and Australian data centre operator Firmus – alongside Ignis Energy, HIP and Utmost in Europe – and the global equity capital markets landscape was already looking complicated well before the US midterms.

Dealogic’s Global IPO Health Index, which tracks the virility of the IPO market using various qualitative metrics, is now in a dramatic fall that reflects other times of high market stress.

Source: Dealogic

Despite this difficult market, Anthropic is set to test investor sentiment with what could be the largest IPO of all time – at a point the AI trade is looking severely challenged.

Its peer OpenAI cut the size of a recent funding round and its valuation due to a lack of investor demand.

A volatile market after the midterms, should there be fears of legislative chaos or a foreign policy escalation, would make any IPO issuer’s task even more difficult.

“There was optimism that we would be busy in the back end of the year,” noted an ECM banker. “At this point, I’m no longer optimistic about that, unfortunately.

“Part of it is the continued indigestion around AI, including concerns about the buildout, the pace of development and everything surrounding that.”

With markets still in a state of high anxiety, they can ill afford further stress. Which leaves all market participants hoping for a smooth ride following the vote this week.