Wall Street braces for market swings as Democrats eye Congress in US midterms

Wall Street is bracing for market volatility as Tuesday's US midterm elections could give Democrats control of Congress, impacting stocks and bonds across AI, defense, and crypto sectors. A UBS basket of Republican-linked stocks has plunged since August, lagging the S&P 500. Democrats are expected to push stricter AI regulation, threatening the tech trade that has driven markets, while defense contractors, big banks, and crypto firms face potential scrutiny. Treasury yields fell as traders sought havens, and investors are positioned long the dollar with little volatility protection, leaving them vulnerable to swings. Gridlock could support bonds by limiting deficit expansion, though analysts say fiscal relief will be modest given a 6% deficit. A strong Democratic showing may lower yields on AI regulation hopes, while defense drone stocks and crypto legislation face risks, and Elon Musk's Tesla and SpaceX could see headline pressure.