Morgan Stanley Research discusses the impact of the Democrat blue wave on US equities.

"The midterms represent the most obvious clearing event we discussed in last week's note, with history providing an encouraging signal. Since 1982, large-cap equities have gained approximately 15% on a cap-weighted basis and 16% on an equal-weighted basis in the six months following midterms, with both measures rising roughly 22% over the subsequent year. In our view, investors broadly anticipate a Democratic sweep with a narrow Senate majority. Thus, given that this was accompanied by a Democratic gubernatorial win in TX, this outcome could contribute to near-term volatility," MS notes.

"However, we think it could mark the final phase of the rolling correction we've been discussing since the summer. Renewed military escalation with Iran or additional tariffs following the elections could also pose near-term risks," MS adds.