Geopolitical risk has been a dominant theme of 2018, with escalating trade tensions, Australia’s Prime Minister getting ousted, traders questioning the independence of Turkey’s institutions, and high-stakes negotiations around NAFTA and Brexit all grabbing headlines at various points this year. With traders focused on these day-to-day developments, arguably the most impactful political development of the year has snuck up on us; the US mid-term elections are now less than 50 days away!

Overview

For the uninitiated, mid-term elections take place, not surprisingly, in the middle of a President’s 4-year term. US Senators are elected to six-year terms, with roughly 33 Senators up for re-election every two years (35 this year), while US Representatives are elected to two-year terms, and as a result, every seat in the House of Representatives will be up for grabs come November 6.

As it currently stands, Republicans currently control both houses of Congress, with 51 Republicans, 47 Democrats, and 2 Independents, who both caucus with the Democrats, in the Senate. Meanwhile, there are 238 Republicans (including 1 Delegate and the Resident Commissioner of Puerto Rico), 197 Democrats (including 4 Delegates), and 6 vacant seats in the House of Representatives.

What’s at Stake?

A near-ironclad rule of US politics is that the President’s party tends to lose Congressional seats in mid-term elections, and with President Trump’s approval rating hovering around 40% as of writing, that tendency is likely to play out again this year.

According to the polling mavens at FiveThirtyEight.com, the Democrats currently have a 75-80% of gaining a majority in the House of Representatives, depending on which model you use, though obviously, this probability will continue to fluctuate as the elections approach. 

Interestingly, even though Republicans have a razor-thin 51-49 advantage in the Senate (note that the Vice President, Republican Mike Pence, casts the deciding vote in the event of a tie), the electoral map is more favorable there, and as a result, FiveThirtyEight gives Democrats only about a 30% chance of taking control of the upper house of Congress. Come November 7th, we’ll know whether Democrats have managed to take control of either the House or Senate, or whether Republicans will control all three bodies of government for another two years.