How the Midterm Stock Market Rout Compares With Previous Crashes

The recent stock market decline following the U.S. midterm elections has wiped out trillions of dollars in market value, but it remains far smaller than the crashes that defined previous financial crises. The Nasdaq Composite fell 5.52 percent on November 5, entering correction territory more than 10 percent below its October record.

The S&P 500 dropped 4.36 percent and the Dow Jones Industrial Average lost 3.44 percent, erasing nearly $3 trillion in value from S&P 500 companies. Despite this decline, tech billionaire Elon Musk's paper wealth was still worth $785 billion, keeping him the world's richest person.

President Donald Trump blamed Americans for their vote in the elections, stating that the market crash was their fault. He also expressed his support for "Super Intelligence," describing it as "gold." The sell-off primarily affected technology stocks, with Nvidia falling 9 percent and Broadcom losing 10 percent. The broader market remains well short of the 20 percent decline typically required to identify a bear market.

The current sell-off shares similarities with the early stages of the dot-com reversal, as both followed enthusiasm for transformative technology and concerns that investment had run ahead of near-term returns. However, today's AI companies are more profitable than the dot-com era's unprofitable businesses. Morgan Stanley noted that election results could lead to delays and stricter regulations for data center projects at the state level, but the broader AI capital-expenditure cycle remains intact.

The 2007-09 crash was deeper and more systemic, losing approximately 56.8 percent of its value as the financial system experienced failures and interventions. No comparable breakdown has occurred in the current downturn. The most recent U.S. bear market, which occurred during a midterm election year, was driven by high inflation and aggressive interest rate increases, rather than election results.