Evercore Identifies Three Conditions That Could Reverse S&P 500's 2026 Rally

The Nasdaq 100 futures market dropped almost 1.5% after the likelihood of a Democratic sweep reached 95%. That event is the first of three conditions in Evercore ISI's most bearish midterm projection.

Should all three conditions materialize, Evercore sees the S&P 500 reaching 6,800 by the end of the year. That level would wipe out most of the index's gains for 2026.

Evercore's Bearish Outlook Requires More Than a Democratic Victory

The S&P 500 has shed approximately $500 billion in market capitalization over two hours, according to The Kobeissi Letter.

BREAKING: Nasdaq 100 futures extend losses to nearly -1.5% on the day as the odds of a Democrat "sweep" rise to 95%.

The S&P 500 has now erased -$500 billion in market cap over the last 2 hours.

— The Kobeissi Letter (@KobeissiLetter) November 4, 2026

A Democratic sweep on its own would not push the index to 6,800. Evercore's analysis also calls for a contested election outcome and a military conflict with Iran before the new Congress convenes in January.

Evercore links the Iran scenario to oil prices, describing that as the largest risk to the economy.

“The exception to ‘buy the dip’ is our view that, should ‘kinetic escalation’ with Iran drive [West Texas Intermediate crude oil] above $120/bbl for a prolonged period (a month or more) or should the oil price spike to the all-time high of $147/bbl, that an economic slowdown, credit widening and a longer and deeper market turndown would result,” the firm said.

On Wednesday, West Texas Intermediate (WTI) crude was trading around $94.40 per barrel. To reach Evercore's $120 threshold, it would need to increase by roughly 27%. The United States reportedly launched a strike on Iran's Qeshm Island on Monday. Nonetheless, prices softened on the day as markets awaited the outcome of the midterm elections.

If that military escalation does not occur, Evercore's projections shift significantly, even with a Democratic-controlled Congress.

In the Absence of Escalation, Evercore Views a Decline as a Buying Opportunity

The scenario closest to the worst case retains the Democratic sweep and contested vote but excludes the military escalation. Under that situation, Evercore projects the S&P 500 at 7,650 and describes any early drop as a chance to buy.

That difference of 850 points represents the price Evercore attributes to a military conflict with Iran.

Evercore's baseline scenario of a split Congress and an unchallenged election outcome yields a target of 7,750. Under the bullish scenario, Republicans retain control of both houses, the election is uncontested, and Iran enters negotiations. A steep decline in oil prices would then drive the index to 8,400.

Even if Democrats take Congress, the White House would remain in Republican hands. President Trump told CBS News on Tuesday, prior to the closing of polls, that he would veto any Democratic legislation if needed.

There are three historical examples of a Democratic Congress under a Republican president. The midterm elections of 1986, 1990, and 2006 each resulted in that configuration. The S&P 500 posted an average return of 10.9% in the subsequent year, according to BeInCrypto.

Nevertheless, CFRA's Arun Sundaram describes a Democratic sweep as the most negative outcome for markets.

For its own portfolio, Evercore maintains a focus on artificial intelligence. The firm continues to hold overweight positions in information technology, communication services, and consumer discretionary sectors.

Evercore also anticipates a rate increase from the Federal Reserve on December 9. The firm estimates that the biggest cloud companies will need to secure $1.3 trillion for capital expenditures in 2027.