As election anxiety returns, Wall Street plans its defense

Kevin Giddis doesn’t expect much in the way of surprises from the U.S. midterm elections. But then again, that’s what he thought two years ago as well.

That fateful night, Giddis, head of fixed-income capital markets at Raymond James & Associates, went to a Memphis Grizzlies basketball game — Hillary Clinton’s presidential victory all but assured. By the time he got back to the firm’s office a few hours later, the market chaos was already in full effect.

“You just want to avoid getting hit in the head” this time around, said Giddis, who, like much of Wall Street, was caught off guard as global markets convulsed following Donald Trump’s upset win in the presidential vote.

Giddis plans to pare back his bets against Treasuries ahead of the election, which he considers his most vulnerable wager should the Democratic Party perform well today.

The midterms come at a time when ballots globally — from Brazil to Italy to the U.K. — are reshaping the course of policy and fueling major shifts in market sentiment. Add to that declining confidence in the ability of polling to predict electoral outcomes, and it’s easy to see why traders are getting anxious once again.

According to poll aggregator FiveThirtyEight, Democrats have a roughly 6 in 7 chance of recapturing the House, while Republicans have a similar likelihood of maintaining control of the Senate. A survey of market participants from Standard Chartered Bank found that most expected stocks, bond yields and the dollar to post small declines on a narrow Democratic House victory, respondents’ base-case scenario.