US Congressional elections: Odds favor a Democratic House and volatility

The US Congressional election tomorrow is expected to return the Democrats to power in the House, probabilities have been creeping higher as the days to the vote shorten.  But if the central tendency of the predictions has increased so have the tails. The possible number of outcomes is now considerably higher that it was two weeks ago. 

RealClearPolitics, the American political website, projects that on average the Democrats will gain 26.5 seats in the lower chamber of the Congress, more than the 23 needed to obtain control. The number of districts in contention has gone from 29 in the middle of October to 39 the day before the election.  The range of potential Democratic gains has expanded from 10 to 39 in late October to 7 to 46 on Monday.  The Democrats could gain 3 fewer seats or 7 more. In statistical terms the tails of the election distribution have gotten fatter. Or to put it another way the uncertainty around the outcome is much greater.

A second indication of the closeness of the election is the generic vote. This has eased to a 7.3% difference favoring the Democrats, the closest it has been since the immediate reaction to the Brett Kavanaugh Supreme Court hearing in early October. 

Equities and the US Dollar have benefited from the economic, regulatory and fiscal policies of the Trump administration. If the Democrats do control the House when the new Congress is sworn in January their anti-Trump agenda, including Congressional investigations of the President and his associates chaired by some of his most virulent political enemies, could severely limit the administration’s policy and political options.  Equities and the Dollar will not be amused.