US political tail risks are in focus ahead of the 3 November midterm elections, with early voting open in more than 40 states. Prediction markets have been broadly steady since 13 October, and one market prices Democrats retaining control of both chambers at a 62.5% probability. The scenarios centre on potential actions by Donald Trump spanning monetary policy, fiscal choices and the use of emergency powers, with particular attention on the Federal Reserve Board and the incoming Senate in early January.
Federal Reserve Board and Senate Dynamics
The report points to the possibility of an attempt to remove Fed Governor Cook before the new Congress is seated, given the risk that a Democratic Senate could constrain subsequent Fed Board nominations. It also sets out election-adjacent risks, with one market assigning a 13% probability of a national emergency declaration before Election Day and a 29% probability by end-2026, while stating that election administration sits at state level.
Risks of Emergency Powers and Extreme Scenarios
More extreme measures are also discussed: invoking the Insurrection Act is priced at a 17% probability by end-2026, with martial law described as the most severe outcome.
