Nov 4 (Reuters) – Democrats notched early Senate wins, fuelling bets they could wrest control of the chamber from President Donald Trump’s Republicans and raising the prospect of a blue sweep in the US midterm election, though the final outcome remained uncertain.
The market reaction was swift, with US stock futures declining sharply and AI stocks down in Asia, while Treasury yields dipped, dragging the dollar lower.
Here are some comments from analysts:
CHRISTOPHER HODGE, CHIEF US ECONOMIST, NATIXIS, NEW YORK:
“The wave looks to be underway; the questions are how high, how wide, and what will the fallout be.
“Economically, we still don’t think the direct implications are huge.
“That doesn’t mean that tonight won’t have big implications. For one thing, Trump doesn’t like bad news and seeing as how he personally selected many of the struggling candidates, he might be looking to change the narrative sooner rather than later.
“A ‘short and intense’ campaign in Iran has been rumoured … and that would certainly be a distraction.
“Presidents typically start making changes after midterms anyway and Trump could be looking for scapegoats. Secretary of Defense Hegseth comes to mind as a possibility. Bessent is another one to watch…he may be looking for a graceful exit if he views the administration as a sinking ship.”
JAKE DOLLARHIDE, CHIEF EXECUTIVE, LONGBOW ASSET MANAGEMENT, TULSA, OKLAHOMA:
“A Democratic sweep of Congress would put pressure on tech and potentially bring regulatory pressure on everything AI and possibly slow down the wild, wild west growth figures that we see daily and often take for granted.
“While Democrats rule Silicon Valley, tech CEOs are rooting for Republican victories tonight.
“Musk was the Hail Mary for Republicans leading down to the wire. Unfortunately, his large infusion of cash to back red states could not overcome higher utility bills, prices at the grocery store and prices at the gas pump.”
TAPAS STRICKLAND, CHIEF MARKET STRATEGIST AT MOOMOO ANZ, SYDNEY:
“I think the fear is that the pace of the AI infrastructure rollout could slow, potentially quite markedly in Texas, as they start to digest exactly what mandate they might have in terms of AI.
“Going into this, we were talking about the importance of the Texas and Georgia governor races. Those two states effectively make up about a third of all AI data centre spend and projects. If both of those go Democrat at the governor level, the potential for it to slow is very much there, and that would obviously cascade through to the rest of the AI sector.”
NICK FERRES, CIO, VANTAGE POINT ASSET MANAGEMENT, SINGAPORE:
“While the Democratic sweep was consensus leading in, the magnitude of the margin likely matters. The risk is around greater regulation of the AI and crypto complex. Also, there will likely be a challenge on the debt ceiling and potential impeachment of the President. The AI complex – measured by the Goldman Sachs Broad AI basket – was down 15% in October and is down over 24% from peak. The Nasdaq is catching up on the downside.”
MICHAEL ARONE, CHIEF INVESTMENT STRATEGIST, STATE STREET GLOBAL ADVISORS, BOSTON:
“I don’t think the big risk to markets is from the blue wave; it’s investors overreacting to a blue wave.”
MARK MALEK, CHIEF INVESTMENT OFFICER, SIEBERT FINANCIAL, NEW YORK:
“It’s a little early, but at the end of the day I think a lot of this was factored into markets. I expect a little bit of volatility overnight and into tomorrow, but I don’t think it’s that crazy, not anything out of the ordinary; 2016 was worse. I feel like the real excitement would have been if the Republicans had unexpectedly seen big gains.”
TAI HUI, CHIEF MARKET STRATEGIST FOR ASIA-PACIFIC, J.P. MORGAN ASSET MANAGEMENT, HONG KONG:
“Trump still has veto power – that will be one of the sticking points for the remaining two years of President Donald Trump’s term. You do have a debt ceiling some time next year.
“In areas such as reversing healthcare spending cuts in the One Big Beautiful Bill, or reversing restrictions on renewable energy, the general consensus is that a divided government is going to create a couple of things – the upside surprise is fiscal deficits are likely to be much more controlled or limited. There’s still a number of areas where U.S. President Donald Trump can influence the markets – trade and tariffs, foreign policy, and existing regulations.
“How much is really the election, how much is the AI story that’s fermented since three or four weeks ago? I think it’s the latter rather than the political story.”
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE:
“Markets appear to be pricing in the possibility of a stronger-than-expected Democratic showing, which could reduce expectations for further fiscal stimulus. That helps explain the softer dollar and pressure on equities. The sharper decline in Nasdaq futures also reflects concerns that a shift in political control could bring greater regulatory scrutiny of AI and Big Tech, at a time when investors are already questioning elevated valuations and rising AI spending. However, lower Treasury yields could eventually provide some relief, so the initial selloff may not necessarily be sustained.”
JESPER KOLL, EXPERT DIRECTOR AT MONEX GROUP, TOKYO:
“This is basically an imperial presidency that operates by executive orders. So the fact that it looks like Congress is turning Democrat, I personally doubt that’s going to have much of an impact on actual policymaking. There’ll be more noise, whether it’s impeachment or investigations into corruption and all these wonderful things the Democrats talk about. But is President Trump’s style of rule going to change? I think the answer is no.
“The AI momentum has turned negative, with or without the Republicans having a majority. The starting point for financial markets into this election, particularly for the equity market, has been adverse on AI, and I don’t think the outcome of the election has very much to do with that, or with whether all the tech bros remain in charge and therefore it’s off to the races again. The criticism and the worries about AI go way beyond politics.
“At the margin, I think it’s going to be dollar positive, in the sense that the market’s perception of greater Federal Reserve independence is going to come to the fore.”
(Reporting by Ankur Banerjee, Gregor Stuart Hunter and Tom Westbrook in Singapore, Rocky Swift in Tokyo, Suzanne McGee in New York and Noel Randewich in San FranciscoEditing by Shri Navaratnam)
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