On Wednesday, global stock markets tumbled.
The Democratic Party gained control of both the House and Senate in the U.S. midterm elections, triggering a 'Blue Wave', which made the political situation in the United States clearer and reduced the uncertainty that had previously troubled the market.
For the first time in decades, the Democratic Party achieved a complete victory in Republican strongholds, bringing significant setbacks to President Trump. The Democrats even made progress in areas that were long considered Republican bastions, highlighting the changing political landscape in the United States. This change could leave some investors unprepared.
All of the three major stock indexes on Wall Street rose, with the consumer goods, finance, and real estate sectors leading the gains. Energy stocks were the ones that saw the largest decline that day. Meanwhile, oil prices fell, and Trump acknowledged that the war in Iran was one of the reasons for the comprehensive defeat of the Republicans.
The Dow Jones Industrial Average rose by 3.03%, the S&P 500 Index by 1.58%, and the Nasdaq Composite Index by 1.44%.
MSCI Global Stock Index increased 1.38%. Stoxx 600 index in Europe increased 1.82%, hitting a two-month high. The index has historically been viewed as a hedge against risks related to artificial intelligence by investors.
Prime Capital Financial Investment Manager Clayton Ellison states: "The market despises uncertainty. Although election results have largely been reflected in asset prices, confirmation of the results still brings certainty to the market. The current issue is what actions Washington will take within the next two years. However, the market welcomes the end of a potentially major change event."
Polls show that Democratic voters tend to favor stricter regulations on artificial intelligence. Investors expect that Congress, controlled by Democrats, will impose more stringent oversight over this industry.
In recent years, the boom in artificial intelligence has driven up global markets. Tech giants are competing to build data centers and expand their computing power, investing huge amounts of money in this process. This has made investors particularly sensitive to any factors that could hinder the rapid development of artificial intelligence technology.
On Wednesday, the stock prices of large-scale cloud computing companies with strong financial resources, including Amazon, Meta Platforms, and Alphabet, rose, while the stock prices of data center operators IREN, Applied Digital, and Core Scientific fell. Chip stocks also declined, with the Philadelphia Semiconductor Index dropping by 3.6%.
"US nationwide insurance company Hackett stated: “This indicates that the market is sending a signal: we have always hoped to see a more rational path for expenditure growth, and now achieving this goal has become more feasible."
Jefferies Group's strategists stated that in the five states where the company tracked significant investments in data centers, all Democratic candidates won their gubernatorial elections. This could provide greater political protection for the artificial intelligence industry, rather than increasing risks. They expect the newly elected governors to implement regulatory measures, rather than completely banning related developments.
They stated that this will help mitigate the potential impact on economic growth caused by disruptions in the artificial intelligence investment boom. Artificial intelligence-related investments have always been a key driver of economic expansion.
Brent crude oil futures prices fell nearly 9%, ending at $94.62 per barrel. Investors are assessing Washington’s possible next steps in promoting the end of the wars in Ukraine and Iran. At the same time, they are worried that recent attacks in both conflicts could further disrupt oil supplies.
Bell Curve Trading's Chief Market Strategist Bill Strazullo said, "Trump has put us in a war without the authorization of Congress. The results of this election show that we will be able to control the situation in Iran. The market is reacting to the fact that there will at least be some form of oversight and restraint in the future."
Cresset Capital's Chief Market Strategist Joseph Zieder said: "Today's drop in oil prices is actually a signal from the market: 'You know that the Iran war is highly unpopular, and you must re-evaluate what you are doing.'"
Zidel said that if this trend continues, 'it will start to significantly reduce inflation pressures and relieve the pressure on the Federal Reserve.'
French-American Bank Global New Market Research Director Phoenix Calhoun said that the Democratic Party's control of Congress may mean stricter supervision on financial policy implementation and limit Trump's ability to expand government spending.
She added, "This will impose stricter constraints on fiscal policy and help alleviate, to some extent, the upward pressure on US Treasury yields."
Due to market concerns about the continuous increase in US debt, the yield on US government bonds has risen since this year. The total amount of US debt has recently exceeded 40 trillion dollars.
