That could support a rally in 10-year Treasury bonds and help stocks extend their recent gains, they said. "I think the markets are rallying at the prospect of gridlock," said Jack Ablin, chief investment officer at Cresset Capital in Chicago. Historically, stocks have tended to do better under a split government when a Democrat is in the White House, with investors attributing some of that performance to political gridlock that prevents major policy changes. The benchmark index has risen about 5% over the last month, cutting its year-to-date decline to about 20%. With U.S. equity options market positioned for relative calm, a surprisingly strong showing by Democrats could upend markets.

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