What markets make of the midterms

The midterm elections in the United States on November 3rd resulted in a significant shift for the Democratic Party. Texas elected a blue senator for the first time in decades, and Kansas did so for the first time in nearly a century. The Senate race in Mississippi, which Donald Trump last won by 23 percentage points, remained too close to call.

In response to these political events, financial markets displayed a lack of significant reaction. The S&P 500 index of large American firms saw a slight increase, while yields on ten-year Treasury bonds edged down, and the dollar weakened marginally.

Investors' indifference can be attributed to the certainty that the Democratic wave would prevent a prolonged and contentious election or a constitutional crisis. The results also brought a sense of stability, as the business environment in America tends to favor divided government. While Democrats may scrutinize federal contracts with companies like Tesla and SpaceX, they are unlikely to interfere with other industries.

However, sectors such as data centers, artificial intelligence, and big tech could experience some turbulence due to potential policy changes. The shift in control of Congress could lead to increased oversight and scrutiny of these industries, resulting in potential losses for firms like CoreWeave, Micron, and Nvidia.