Blue Wave Triggers Sell Signals for Tech and Dollar

As election returns come in, the US dollar is declining, reflecting a complete repudiation of Republican policies.

Fox News is discussing the Iran war as a ballot-box disaster, while affordability—a clear voter issue—was also highlighted. Tariffs remain a close concern.

However, with Trump in office for two more years, it is difficult to factor in any reversal on Iran or tariffs. The main market driver and potential pivot point is data centers and AI. Democrats have taken an anti-AI position, or at least a slower pace than the current rapid rollout. In states like Texas and Ohio, data centers became a major issue, and pro-data center candidates appear likely to lose the governor races.

Furthermore, tech firms aligned closely with Trump before the previous election and have deepened those ties since, benefiting from a 'move fast and break things' environment. Now, Democrats could seek revenge for the large contributions made to Republicans through regulation, penalties, and probes. This explains why the Nasdaq is currently down 1.5%.

Additionally, the AI investment theme is already fragile, and this development could push it further. In foreign exchange, the dollar is becoming more of an AI-linked trade. A reversal of capital inflows into AI would lead to outflows from the USD. This pattern has been evident over the last two months, with a tightening correlation.

I am concerned about potential secondary and tertiary effects should Trump launch a strike on Iran impulsively or become more erratic. For the moment, I believe the market is giving accurate cues: sell technology stocks and sell the US dollar.

To illustrate the scale of this upset relative to forecasts, Senator Lindsay Graham's seat appears to be lost. The probability of that outcome in October was only 14%.