Markets like when the fog of uncertainty starts to lift

We are waking up to a lot more clarity about the election than anyone, even Democrats with the wildest imaginations, had anticipated Tuesday.

Why it matters: For investors, less uncertainty could mean better returns, per an intriguing analysis from equities analysts at Bloomberg Intelligence.

Zoom in: They looked at 20 midterm cycles, back to 1946, and found that returns for the S&P 500 have been historically subdued leading into the midterms and higher once they were over.

By the numbers: The average gain on the S&P 500 in the three months heading into an election was about 1.8% on average.

• In the three months after, it's 7.5%. (These gains don't include dividends.)
• The analysts didn't include S&P returns this year, but a quick glance reveals that they indeed have been slumpy. Coming into Tuesday, the index was down 0.8% since August.

Yes, but: It doesn't happen every time. Three-month returns after a midterm exceeded pre-midterm returns 15 out of 20 times.

The latest: Though U.S. stock futures were in the green early Wednesday morning, under the hood some assets were faring less well.

• Shares of Republican mega-donor Elon Musk's companies Tesla and SpaceX were both down more than 4% in pre-market trading.

The other side: Billionaires do appear on track for at least one win: In California, a measure that would have enacted a 5% wealth tax on individuals and trusts with more than $1 billion in assets appeared headed for defeat after facing heavy opposition from Silicon Valley.

What to watch: The AI trade is under the lens. In a race investors were watching closely, Texas elected Democrat Gina Hinojosa governor. She has suggested a moratorium on new data centers until tougher regulations can be put in place.

• The state accounts for 41% of new U.S. capacity expected in 2028, according to the research firm SemiAnalysis.
• Out of 41 data center measures on the ballot across 10 states, about two dozen proposals intended to restrict or block development appeared to have passed based on initial returns, Axios' Maria Curi reports.
• "Data centers in space look pretty appealing right now," Musk posted late Tuesday night.

Zoom out: "We expect Democrats to use fiscal deadlines to seek to limit the war with Iran, roll back selected tariffs, and reverse spending cuts enacted last year," Goldman Sachs economists wrote Wednesday morning. They don't expect changes to AI regulation at a national level.

Between the lines: With a Democratic majority assured in both chambers of Congress and a Republican in the White House, we're probably in for two years of political gridlock.

• Markets typically like that, says Christopher Cain, global head of equity strategy at Bloomberg Intelligence.
• "The question for markets was whether such a large margin of victory would be contested by the administration or accepted," writes investor Bob Elliott Wednesday morning. "Before midnight it had been accepted, and the uncertainty of a prolonged conflict appeared to be off the table," he writes, calling the gains in the futures market a "relief rally."

The bottom line: While we can't be certain what happens next in markets, we do know that we'll be seeing fewer political ads — and that is enough to brighten any mood.