Tuesday's midterm elections arrive after a rough month for tech stocks, and investors are preparing for two years of political gridlock if Democrats win.

'Mr. Veto' Looms Over the Market

Market commentator The Kobeissi Letter said in a post on X Monday that the sell-off is "more than just a correction in tech stocks," arguing that investors are also "pricing in two years of political gridlock."

Traders on Polygon (CRYPTO: POL)-based Polymarket give Democrats a 95% chance of controlling the House and a 77% chance of controlling the Senate.

"Markets hate uncertainty," and with President Donald Trump threatening to be "Mr. Veto" if Democrats win, the commentator said Tuesday's election "sets the stage for the next two years."

Trump told the New York Post that he would turn into "Mr. Veto" if Republicans lost the House, but also said he would eventually make deals.

History Offers Comfort After Midterms

Since 1938, the S&P 500 has posted price gains in the 12 months after midterms about 95% of the time, according to Fidelity Investments.

Morgan Stanley's Mike Wilson called the election a "clearing event" that could help stocks no matter which party wins.

Carson Investment Research's Ryan Detrick said the S&P 500 rose in all 19 November-to-April windows after midterms since 1950.

S&P 500 Up Nearly 10% This Year

The S&P 500 is up 9.96% so far this year, but the tech-heavy Nasdaq has shed nearly $1 trillion in value in a week and about $2 trillion in the last month.

Over the past month, the S&P 500 is down 2.99% but up 4.73% over the past six months. On Monday, the index closed 0.51% lower.

Meanwhile, the Nasdaq-100 has dropped 9.93% over the past month, while it is up 11.04% so far this year.

Price Action: The State Street SPDR S&P 500 ETF Trust (NYSE: SPY) closed 0.48% lower on Monday at $752.10 and fell 0.10% in overnight trading, according to Yahoo Finance. The Invesco QQQ Trust (NASDAQ: QQQ) fell 1.36% to close at $681.09 and gained 0.08% in overnight trading.

MarketDash Edge rankings indicate the Invesco QQQ Trust has a Momentum score in the 59th percentile and a negative price trend in the short and medium term, while it has a positive rating in the long term.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by MarketDash editors.