US Congress turns blue: how do markets react?

00:00:01: The verdict from the US midterm elections is largely in and Congress is turning blue, ladies & gentlemen putting technology stocks under pressure on fears of greater screenety of AI.

00:00:12: U.S.

00:00:13: Treasury also rallied this morning as investors bet on less fiscal expansion in the u.s From now On.

00:00:19: but less fiscal Expansion means potentially slower growth for the us economy And hence a weaker US dollar.

00:00:27: so welcome to swiss coats daily market talk.

00:00:30: It's Wednesday, fourth of November.

00:00:33: I'm Ipe Kreskar Deshkoia and in todays episode we will obviously be talking about how these US midterm elections could impact the global market prices ,the market dynamics and more.

00:00:44: but before Please keep in mind that this is not a political show, That I will NOT be expressing any political opinion.

00:00:54: Any political preference and i Will NOT engage In any political discussion here.

00:00:59: Everything I'll say will be based on my own Opinion & Analysis only And This Is Not Financial Advice.

00:01:05: So you're more than welcome to join the Discussion!

00:01:08: I love it when You do so But please Keep Calm and Remain Plight.

00:01:21: Also, the US midterm elections have gone quite badly for the Republican camp with Democrats taking control of the Senate and also the House.

00:01:30: So we have a majority in both chambers In the

00:01:33: U.S.,

00:01:33: Congress has just turned blue.

00:01:36: The markets react globally.

00:01:37: obviously Asian equities especially technology heavy indices are down this morning on fear of a tighter scrutiny On AI trade due to notable implications on jobs, as job losses were very heavy over the past few years and also impact on environment.

00:01:56: As we discussed earlier this week remember Trump administration has put all its weight behind AI.

00:02:02: build out to bring manufacturing back America To make America great again And to win the AI race over China For next two year stretch.

00:02:11: it will become harder push through his legislative agenda.

00:02:15: Hence support for the AI boom will likely face greatest.

00:02:19: This is why the Asian technology stocks are down this morning.

00:02:23: The Korean Cosby index, it's down by around point twenty one percent at a time.

00:02:27: I'm talking here better than earlier in the session while Thai X which is home to very TSMC company that manufactures NVIDIA and AMD chips It's down more then three-and-a half percent of the time.

00:02:41: we do see some defying an eight per cent rally in AMD shares during after hours trading.

00:02:49: help that dip buying right now but infinite.

00:02:52: the technology sucks are not looking great this morning in the wake of US midterm elections.

00:02:57: Now quickly for AMD, AMD actually beat expectations yesterday when it's revealed its latest quarterly results and forecasted a revenue growth above eighty percent for two thousand twenty seven versus expectations off as seventy-seven per cent.

00:03:12: growth allows again investors or not in a mood to cheer up right.

00:03:17: In contrast with the climate-friendly companies though, they are doing quite well today.

00:03:22: Samsung's Cadex Renewable Energy ETF for example is up by more than six percent!

00:03:28: Elsewhere US futures are pointing at a bearish start to todays trading session with NASDAQ Futures leading losses here.

00:03:36: These midterm results from the U.S could actually support further rotation of technology toward non-technology pockets after market.

00:03:46: The letter would also also be mainly supported by the slowdown that we saw in Magnificent seven earnings growth and third quarter of this year.

00:03:54: And higher earnings growth rate printed by S&P.

00:03:57: four hundred ninety three so far in this earning season, I'm talking about blended expectations an actual results here In the bar market, U.S.

00:04:07: tenure yields short this year past a five percent mark in yesterday's trading session before easing now.

00:04:13: overall investors actually do welcome the prospect of political gridlock in the US as democratic gains reduce expectations for further fiscal expansion or less say slower fiscal expansion.

00:04:27: Now, we are nowhere near fixing the existing US deficit obviously.

00:04:31: That is very high but making additional spending or unfunded tax cuts harder to pass offers some relief to Treasury investors today as if someone has just stepped into a room and asked how bill will be paid?

00:04:45: In energy space U.S.

00:04:46: critics software this morning.

00:04:49: in short one though developments that might see in the Middle East certainly outweigh the US political headlines.

00:04:56: Yet, as we discussed in detail in yesterday's Market Talk episode if you haven't watched just go back and watch it.

00:05:03: Democrats winning control of both chambers!

00:05:06: In the US increases scruinity after administration handing off the war on Iran?

00:05:11: The new Congress could use this influence over spending to challenge additional military funding.

00:05:17: an increased pressure for a diplomatic solution once takes office.

00:05:23: If on top, the result is followed by credible negotiations and prospects of safer shipping through the state of warmest oil prices could fall sustainably.

00:05:35: I was also saying that would be the sweetest case scenario for the world economy!

00:05:41: Remember?

00:05:41: Though it's once automatically and a conflict in the Middle East know will change other headaches.

00:05:47: but... Good start, probably.

00:05:49: In the effects space to Democrats strong wind is waning on US dollar.

00:05:54: The green bag is falling alongside U.S.

00:05:56: Treasury yields unsurprisingly as political gridlock in the u.s could limit further spending and tax cuts And that would in turn limit us growth prospects.

00:06:07: That's a thing Whereas until now, stronger US growth prospects were responsible for the U.S.

00:06:13: dollar's road-based appreciation.

00:06:14: We saw that very clearly through the rising real rates in the West while inflation expectations rate broadly in check near the Federal Reserve's two percent policy target.

00:06:26: That dynamic simply meant that a stronger economic growth pushed U.S.

00:06:30: yield higher, making the US dollar-nominated assets more attractive.

00:06:35: Now midterm election results take some of this support away obviously as less fiscal stimulus could lead to slower growth than previously expected especially after AI buildout slows and well... a softer US dollar as a consequence.

00:06:53: Now note that the U.S won't lose its growth advantage overnight over other countries, but changes in expectations are what move markets.

00:07:00: so investors or and will be reassessing today and in the coming days and weeks how much that growth advantage from the u.s could narrow And more us growth expectations weaken relative to those elsewhere The greater downside pressure on the US dollar.

00:07:17: So in summary, the US elections end up with a notable democratic victory.

00:07:21: The latter is waiting on AI and technology stocks, supports climate-and environment friendly sectors, weighs on U.S.

00:07:28: deals on expectation of improved or at least less slowly worsening fiscal trajectory in the US which however also weighs on growth prospects for the US economy.

00:07:40: And the latter weighs on the US dollar.

00:07:42: Now.

00:07:42: I haven't heard President's reaction just yet.

00:07:44: it could get a bit hectic from here.

00:07:46: so we We will keep watching, but at the same time we'll also be watching upcoming earnings from technology companies.

00:07:52: ARM and Qualcomm report today.

00:07:54: after US closing bell and Wall Street expectations are different with ARM expected to deliver a revenue growth of around twenty-one percent thanks to AI demand which remains very robust while Qualcomm faces roughly ten per cent decline as the company is expected.

00:08:15: Apple is making more of its own, meanwhile it's newer businesses which are chips for AI PCs and data centers but also cars and connected devices aren't yet big enough to make up the difference.

00:08:29: As such The Results will offer two different perspectives on the AI trade.

00:08:33: today after Debell For ARM, investors will be looking for continued strength and data center demand.

00:08:39: While for Qualcomm the question is whether opportunities beyond smartphones including AI PCs or Data Center inference can offset weakness in a traditional market?

00:08:50: Now, it's important to note that this far earlier earnings pointed to strong data center demand while PCs and some other pockets of the market remain under pressure.

00:09:01: The price rise in cost of living, higher raw material prices, disrupted supply chains But even that AI strength struggled to reassure investors who have been growing increasingly uncomfortable with the scale of this AI spending and obviously also uncertain returns on these huge AI investments.

00:09:23: And today, while U.S.

00:09:24: midterms also add to the fear slower investment growth putting further pressure on AI related stock valuations.

00:09:30: therefore my guess is that even strong results from ARM and Qualcomm after the bell may not reverse actual muddiness that we see among AI investors.

00:09:41: Maybe I'm wrong, so it's going to be very interesting to watch how the markets continue to react to U.S.

00:09:46: midterm elections and other developments.

00:09:49: obviously We will talking about these midterm results and implications for global economic dynamics in coming days or weeks but this is all today.

00:10:06: This episode of Market Talk has been helpful and it's been insightful to you, so please do not hesitate.

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00:10:41: And until then good day

00:10:57: trading!