Democrats are within reach of gaining a House majority, Goldman said in a report Monday. The prediction market-implied odds of Republicans maintaining their majority in the House is 44 percent, up from 32 percent two months ago. Odds of the GOP holding its majority in the Senate are 75 percent, up from 64 percent.

Goldman Sachs analysis of the current prediction market concluded that November will be a closer election than earlier forecast. Enthusiasm readings indicate Democrats have lost some of their advantage.

Democrats still have an advantage in the November midterm election, but the anticipated blue wave seen sweeping away the Republican majority in Congress has diminished from just a few months ago.

The generic ballot, which asks voters if they prefer a Republican or Democratic majority in Congress, peaked at a 12 percentage point Democrat advantage in December but has come back down to 5 to 6 percentage points, Goldman said.

"Beyond polling, primary and off-cycle elections provide some useful information and generally support the conclusion that Democrats are within reach of a majority but that their lead has diminished since earlier in the year," the report said.

Goldman notes the outlook is likely to shift as Election Day draws near. It lists five things to watch: Special elections in solidly Republican districts in Texas and Ohio, Washington state's primary, which like California, advances the top two candidates to the general election, primary contests in Arizona and Missouri, ballot initiatives that could affect voter turnout in key battleground states, and developments in Washington.

Goldman says the midterm election outcome is less consequential for financial markets than the 2016 election. Only control of Congress is in question, not the White House. And as with any presidential term, most of the biggest decisions and actions are taken in the first year or early in the second.

— With reporting by CNBC's Michael Bloom.