- A blue wave with consequences: Early results point to substantial Democratic gains, with projections of 55 Senate seats and more than 250 House seats raising questions about Trump's policy agenda and the 2028 election.
- AI becomes the market's punching bag: NASDAQ futures fall 2.3%, with rallies sold aggressively and buyers struggling to establish a floor.
- Asia feels the pressure: Japan's Nikkei falls around 4%, while Korea's memory-heavy equity market comes under significant selling pressure.
- Pepperstone's 24-hour markets light up: AMD retreats 5.9% from its post-earnings high, while SpaceX and Nvidia fall 7% and 4%, respectively, from their Asian-session peaks.
- Anthropic shows relative resilience: Pepperstone's pre-IPO market rebounds from $110.11 to $115 despite broader AI weakness.
- Political risk moves into asset prices: Investors reassess deregulation, corporate taxation, data centre investment and the prospect of fiscal brinkmanship.
Today certainly isn't 2024, but the scale of the shift in US voting intentions has clearly shaken markets, forcing investors to reassess political risk and the assumptions underpinning asset valuations.
Projections point to Democrats securing around 55 Senate seats and more than 250 House seats, with significant swings across traditionally Republican strongholds. South Carolina provided an early indication of the changing mood, followed by reported Democratic gains in Kansas, Texas, North Carolina and several House contests.
These results raise questions about voter attitudes towards data centre development, returns on capital invested by hyperscalers, foreign policy, fiscal debasement and Trump's broader agenda.
The blue wave itself may not be the surprise. The magnitude of the victory is what has caught markets off guard.
The temptation will be to extrapolate these voting patterns into 2028, but two years is a long time in politics. Candidates change, economic conditions evolve and voter priorities shift. There is no guarantee today's political momentum survives until the next presidential election.
For now, markets face a more immediate challenge: how to price a potentially significant change in the US policy landscape.
Markets enter a political price-discovery vacuum
The initial reaction has been a sharp repricing of risk, with investors struggling to establish fair value across sectors exposed to government policy.
A more difficult path towards deregulation, the possibility of higher corporate taxes after 2028, greater scrutiny of data centre development and changes to healthcare tax cuts and defence spending, with implications for the fiscal deficit, all enter the equation.
Markets can price a policy change. What they struggle to price is a widening range of possible outcomes when nobody knows which policies will survive, stall or be rewritten.
That uncertainty creates a wider distribution of potential returns, and volatility is the natural consequence.
The prospect of a more confrontational Congress also brings fiscal negotiations into focus, particularly any debt-ceiling debate in Q1 2027. A prolonged standoff could create significant disruption in short-dated Treasury bills and broader funding markets.
AI becomes the target of concern
Technology has borne the brunt of the selling through Asia, with NASDAQ futures down 2.3% and even the slightest rallies attracting fresh supply.
The selling has been particularly visible in Pepperstone's 24-hour US equity markets, especially across semiconductors and broader AI-related names. It could be a tough day at the office for the SOXX index when US cash trading gets underway.
Case in point: our 24-hour AMD market initially rallied to $529.94 following an encouraging quarterly earnings outlook. However, as election results hit the wires, pricing fell 5.9% from that high.
SpaceX has fallen 7% from its Asian-session peak, while Nvidia is down 4% and testing $200. The broad selling across AI and semiconductor names suggests a lively US cash open.
When stocks sell off despite strong earnings, it tells us investors are trading positioning, political uncertainty and risk appetite rather than simply company fundamentals.
The pressure has extended across Asia. Nikkei futures and the cash index have fallen around 4% on elevated turnover, while the KOSPI is down 3.4%.
China and Australia have held up comparatively better, while our opening calls for European equity indices, although lower, also suggest relative resilience.
Anthropic holds its ground
Pepperstone's Anthropic pre-IPO market initially followed the broader AI complex lower but has since shown notable relative strength.
After touching $110.11, buyers returned, lifting pricing towards $115. There's no obvious new catalyst behind the move, suggesting the recovery may be driven largely by trading flows.
What's interesting is Anthropic's ability to attract buyers while established hyperscalers and semiconductor stocks remain under pressure.
Attention now turns to the anticipated amended S-1, with traders looking for the indicative IPO price range, number of shares offered and initial free float.
Those details should provide a much clearer framework for assessing the premium or discount in our pre-IPO market relative to the proposed IPO valuation.
The trading takeaway: The political shock meets the AI trade
The USD initially weakened before finding buyers, while gold, having performed well in early Asian trade, has surrendered its gains despite a sharp decline in Treasury yields.
For now, equities are bearing the greatest burden of political uncertainty, with technology and AI at the centre of the adjustment.
The blue wave may have been anticipated, but its scale has forced a reassessment of risk. The question now is whether markets find a clearing price quickly or whether uncertainty triggers another round of liquidation.
With US cash trading still ahead, the real test of conviction is yet to come.
Good luck to all...
Chris Weston, Head of Research, Pepperstone
