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Trading the midterms

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(A.M. Stewart/Getty Images)

Hey Snackers,

If you’ve ever eaten a potato but wished you’d roasted a chicken, well, do American food scientists have just the foodstuff for you. It took food scientists at Cornell University more than a decade, but the Poulette – a potato that tastes like chicken – has arrived, Food and Wine Magazine reports. The quest to develop this specific new tuber began with chef Dan Barber’s love of heirloom vegetables (seriously, as someone who once sat through about a dozen courses of different kinds of obscure squash at Blue Hill at Stone Barns, I can say the guy is obsessed with the stuff), and in this case a specific type of French potato that was then crossed with a more modern varietal by researchers. The Poulette is sold by Barber’s seed company and will be available in (of course) Whole Foods’ locations in the tri-state area.

Stocks fell on Monday.

PVI TO ROI

Trading the midterms

Today is Election Day in the United States, and traders will be keeping a close eye on the returns to get a sense for how the partisan makeup of Washington and, in some cases more crucially, governor mansions may change for the next two years.

  • First things first, what is likely already priced in. As it stands, prediction markets have a 94% chance* that Democrats take control of the United States House of Representatives and a 76% chance of taking the Senate. While everyone’s model is a bit different, on balance traders have been likely positioning themselves for split control in Washington, with Democrats controlling Capitol Hill and Republicans the White House.
  • As Sam Ro points out, “the periods before and after midterm elections are famously volatile for stocks,” Markets tend to perform well once there’s a clear indication of a result, and in general equities catch some tailwinds once the uncertainty is in the rearview.
  • Inyesterday’s EntryPoint, Luke Kawa put it succinctly: “History says that just getting the midterms out of the way will be a positive for US stocks.” However, options markets have been essentially treating the midterms as a non-event. After all, with such a high chance that the House flips, at this point a divided government in Washington can be considered highly likely regardless of the outcomes of a few massive Senate races.

Now, that’s not to say there’s nothing on the line here for traders.

  • One concern coming from some analysts on the Street is that, with the midterms in the past and the risk to his coalition realized, President Trump will lose one potential reason to not escalate the politically unpopular war with Iran. That’s more a matter of timing than the actual results, though, but if I run an airline I’m not exactly looking forward to the next couple of weeks of fuel cost price action.
  • What will be watched very closely by anyone involved in the AI trade is the performance of a number of candidates who have been riding a wave of anti-data center enthusiasm that has cut across traditional party lines.
  • For instance, while markets still currently price her as a 37% underdog in Texas against incumbent Gov. Greg Abbott, Texas Rep. Gina Hinojosa has called for an immediate moratorium on data centers. Texas has more large projects underway than any other state, and that’s been motivating voters who oppose the projects regardless of their typical politics.
  • A win for Hinojosa would likely have ramifications for the AI trade on Wednesday, given the Lone Star state has 27 GW of data center capacity planned; wins for adversaries of the data center development across the map would likewise constrain the ability of the hyperscalers to, well, hyper scale.

So, given the stakes, how do we watch?

THE TAKEAWAY

Polls close at different times over the course of the evening, and states tend to count votes at different speeds from one another. Some states have speedier counts and can expect their votes to be counted super quickly — Florida, after a rather infamous 2000 election, got its house in order and is now one of these — while some states are going to take some time, like Maine, which reports by township and thus will be slow to provide results.

By looking at key congressional districts in states that report quickly and close early, we’ll have some indications pretty early in the evening as to how the election is likely to play out over the course of the night. It’s not perfect — the voters in Michigan and the voters in Texas will likely behave similar in general, but have enough differences that we’re not expecting a uniform swing across the map — but if you want some early insight as to how the race is going to go, here’s a few early races that election projection decision desks like DDHQ are going to be paying attention to:

  • The first polls close at 7pm, and Florida and Virginia will be the fastest to report. Look to Virginia’s 1st and 2nd District, Florida’s 15th and 25th for how the House might go. If Democrats flip VA-02, they’re on track for a good night, and if they flip VA-01 as well or hold both Florida districts the Democrats are very likely to flip the House. If Republicans flip the Florida districts, or manage to hold VA-02, they could very well hold the House.
  • After 8, we’ll get results in Ohio and North Carolina. The bellwether districts in North Carolina are NC-01and NC-11, keep an eye on those for an indication of how the night will go. If there’s a call in Ohio’s Senate race for the Democrats, they’re then the favorite to flip the chamber.

Just because we’ll have some strong hunches early in the evening doesn’t mean we’ll have precious clarity any time soon. With a close Senate race in Alaska that (a) won’t start posting results until after midnight Eastern Time and (b) will go to a ranked-choice instant runoff if no candidate clears 50%, it’s entirely possible that we don’t know control of the Senate by opening bell on Wednesday.

CHART OF THE DAY

Congressional incumbents are less popular with their electorate than ever, per new poll

If midterm elections are, as some say, a referendum on the incumbent,much of the American voting public seemed to indicate that they’d be rejecting the proposal, per the latestGallup pollon midterm voting intentions.

Snacks Shots

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.

If you thought the downright ancient computer storage system of magnetic tape was a relic of the 1950s mainframe era, that’s actually not quite right. Data centers in particular and companies in general love it for cheap, long-term storage and ways to back up vast troves of data in a way that cannot be hacked. Fujifilm, which makes most of the tape these days, is plowing ¥10B ($63M) into scaling up production capacity to meet ravenous demand.

What else we're Snackin'

Snack Fact of the Day

Egyptologists have found the name of a dog that lived 3,500 years ago in ancient Egypt.It is “Duaty,” which means “He-of-the-Underworld.” Sounds like he had loads of personality.

Tuesday

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