Wall Street: JPMorgan's "Democrat Factor" surges 20%, as market expectations for a Democratic sweep of both chambers of Congress rise, with crypto-related assets listed as shorting targets.

JPMorgan Chase's "Democrat Factor" has risen by approximately 20% since August, significantly outperforming the S&P 500's 2.6% gain over the same period, reflecting Wall Street's growing expectation of a Democratic sweep of both chambers. Prediction platform Polymarket currently prices the probability of a Democratic sweep at 64-65%. However, pricing at the broad U.S. stock market index level still reflects the old baseline scenario of a "divided Congress."

ZeroHedge, after reviewing the latest research reports from major investment banks, noted that JPMorgan Chase Delta-One strategist Manish Sinha stated that if compared on a risk-parity basis, the factor's annualized return would be as high as approximately 170%. Goldman Sachs strategist Alec Phillips cited historical data, cautioning that prediction markets tend to overestimate the probability of the challenging party sweeping both chambers as midterm elections approach, with an average decline of about 5 percentage points from early October to election day.

Wall Street investment banks have also provided specific long and short strategies for a "Democratic Congress" scenario, including recommendations to short small and mid-cap defense stocks, capital market-related stocks, energy permit beneficiaries, and cryptocurrency-related assets driven by the CLARITY Act.