The US dollar is selling off as the election results roll in and they show a total repudation of Republican policies.
Fox News is talking about the Iran war as a disaster at the ballot box and in terms of affordability, which was clearly on the ballot. Tariffs aren’t far behind.
Still, it’s tough to price in a reversal in Iran or on tariffs with Trump in office for another two years. What is driving markets and could swing is data centers and AI. Democrats took an anti-AI stance or at least something slower than the full-throttle roll out now. In Texas and Ohio in particular, data centers became a huge issue and it looks like the pro-data center candidates will lose the Governorship.
Moreover, tech companies dove into bed with Trump ahead of the last election and most have gotten more-deeply involved since, as they were given to move fast and break things. Now, Democrats might look for some retribution for the massive checks they wrote to Republicans, via regulation, fines and investigations. That’s why the Nasdaq is down 1.5% at the moment.
Moreover, the AI trade is vulnerable already and this could tip it further. In terms of FX, the dollar is increasingly an AI-investment trade. If we see a reversal of the flows into AI, that means the money will flow out of USD. We’ve seen this dynamic unfolding in the past two months with an increasingly-tight correlation.
I worry there could be some second and third order effects if Trump attacks Iran in a fit, or grows less predictable. For now, I think the market is sending the right signals: Sell tech, sell USD.
To give you a sense of how big of an upset this is — even compared to expectations — is that Lindsay Graham’s seat looks lost. The odds of that in October were just 14%.
This article was written by Adam Button at investinglive.com.