Volatility could spike on close mid-term election

By Ryan Vlastelica

NEW YORK (Reuters) - The U.S. stock market is expecting the Republican party to gain a majority in the U.S. Senate in next month's mid-term election, but some close races may create a spike in "confusion and volatility," an analyst wrote on Monday.

Robbert van Batenburg, director of market strategy at Newedge USA LLC in New York, said that while he expects the Republicans to end up with a "razor thin" majority in the next Congress, potential run-off elections could delay that result from becoming official for more than a month.

If the presence of a Libertarian candidate results in no candidates winning a majority in the Georgia Senate race, that would result in a run-off election set for Jan 6, a scenario that "could leave [the] market in limbo."

He added that in the previous six mid-term years, there was a five-point move in the CBOE Volatility index between June 1 and Oct 31 on four occasions.

Even if the Republicans win all the races that are projected to be close, the party's majority will still fall short of the margin required to stop a Democratic filibuster.

(Editing by Nick Zieminski)