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After the shocking results of the US Midterm Elections, the eyes of the global financial markets are on Wall Street. Amid reports of the Democratic Party gaining control of both houses of Parliament (Senate and House of Representatives), the US stock market witnessed huge fluctuations and sharp selling in select sectors. Especially there was intense pressure on the shares of big companies related to Artificial Intelligence (AI), Semiconductor, Defense and Technology, due to which there was a lot of turmoil in Nasdaq and S&P-500. This major political change in the balance of power has created an environment of uncertainty among investors regarding upcoming government policies, corporate tax, regulation and defense budget. This market turmoil has also affected the retirement funds (401k) of ordinary American citizens, due to which the turmoil has intensified from Dalal Street to global markets.
President Donald Trump has issued a direct and aggressive statement on the social media platform Truth Social on the sharp decline in the American stock market and the losses suffered by investors. Trump held his rival Democratic Party completely responsible for this market decline and said that all this happened because of their control in the elections. In his post he wrote that the American stock market has faced one of the worst days in history based on the election results. Addressing the general public, he said that years of hard work had been done to take the economy to historic highs, but the results have seen people’s 401(k) retirement accounts collapse. Trump sarcastically said that the public should remember that this decline has come not because of the Republicans, but because of the victory of the Democrats. He also assured his supporters and wrote that there is no need to panic, soon the economy will emerge bigger and stronger than before.
Market analysts believe that with Democrats coming into majority in both the Houses, there will be a tough confrontation (Gridlock) between the White House and Congress. The Trump administration’s uncontrolled support of tech companies and AI data centers now faces the threat of tough legislative restrictions and new regulatory scrutiny. Due to this apprehension, there was a huge fall in the shares of leading chipmaker companies like Nvidia, Micron and Marvell. Apart from this, major defense stocks like Lockheed Martin and Northrop Grumman also became vulnerable to selling due to foreign policy and political pressure on possible cuts in defense spending or reducing the Middle East conflict. On the other hand, shares of Trump Media and Technology Group (DJT) and Musk’s companies also saw a sharp decline as the possibility of parliamentary investigation against them by opposition MPs has increased.
Financial assets witnessed a very contradictory reaction after the political equation changed. While on one hand there was a slowdown in the shares of tech stocks and traditional oil companies (like Exxon Mobil), on the other hand there was a sharp decline in the prices of crude oil (Brent crude). Investors hope a divided government will put pressure on war-related policies, which could lead to stability in energy supplies. Softening oil prices and falling US 10-year Treasury bond yields also provided some support to traditional value stocks, healthcare and retail sectors. Analysts say Wall Street will continue to be hit by political turmoil until the new Parliament formally takes office in January 2027 and there is clarity on fiscal policies.
The direct impact of this movement in the American markets is being seen on the stock markets around the world including India. While the selloff in US tech stocks has created an atmosphere of caution on Asian tech companies and the Indian IT index (Nifty IT), the sharp fall in crude oil prices and the weakening US dollar have brought relief at the macro level for import-dependent economies like India. Global fund managers are currently keeping a close eye on the political impasse in Washington and upcoming economic policies before making any major new investments.