09/11/26: US midterms, tech stock slumps & US jobs report

Monday Espresso Podcast - 9th November 2026

[00:00:00] Nathan Sweeney: Good morning everybody. Today is Monday the 9th of November. I'm Nathan Sweeney, Chief Investment Officer here at Marlborough, and I'm joined here by Rory Dowie, Portfolio Manager on the team.

[00:00:10] Nathan Sweeney: Many of you know Rory from hosting this podcast, so it's nice to turn the tables for once. Rory. Good morning.

[00:00:16] Rory Dowie: Good morning Nathan.

[00:00:18] Nathan Sweeney: So as everybody's known, it has been a very big week. Last week we had the US midterm elections, so they took place on Tuesday and it's been one of the main questions coming from clients this week. What does the result mean for the markets? And in particular for the AI trade that has
been driving much of this year's returns.

[00:00:38] Nathan Sweeney: So that's the focus for today. First thought, Rory, how did the markets get on last week?

[00:00:43] Rory Dowie: A week of two halves really Nathan, and that was characterised pre and post the midterm elections. They actually rallied on Wednesday, once the results were in, the Dow Jones was up over 1500 points as some of that election uncertainty cleared.

[00:00:58] Rory Dowie: But Thursday was a very different story. The S&P actually fell 4.4% and that was its worst day since the tariff shock we had back in April, 2025. The tech heavy NASDAQ part of the market, that obviously contains a lot of those AI companies we talk about that dropped 5.5% and actually slipped into what we called correction territory.

[00:01:18] Rory Dowie: Around $3 trillion of value was wiped off the S&P500 in a single session. So pretty brutal day on Thursday. We did have a partial bounce on Friday and that was helped by a strong US jobs report. We had 165,000 jobs, which were added in October, and that was against expectations around 59,000, so that was a positive sign, at least.

[00:01:39] Rory Dowie: Still for the week the S&P500 finished down 2.7%, and that was its worst week since June.

[00:01:45] Rory Dowie: Year to date though, the S&P is still up about 8%.

[00:01:50] Nathan Sweeney: Yeah, so I suppose a lot of focus on the US market last week, but obviously there's other markets out there. So how did they perform?

[00:01:57] Rory Dowie: Yeah, quite right, Nathan. The pain was mainly concentrated in the US market, but clearly other markets exposed to the AI theme, also suffered. So Japan's Nikkei a fell over 9% of the week and is another one, which is in a technical bear market that's more than 20% below its peak. Korea, another name exposed to AI was down 12%, but actually close to home it was a little bit calmer.

[00:02:19] Rory Dowie: The FTSE 100 was down half percent and Europe was actually slightly positive. They're two slightly more defensive markets. They have much less tech exposure than the US and some of those Asian countries I mentioned

[00:02:32] Nathan Sweeney: Really a story of where your exposure sits, I suppose. If you're heavy in AI and semiconductors, it was a painful week, but if you're more diversified, much less so.

[00:02:42] Nathan Sweeney: So let's get into midterms, Rory, so for listeners who haven't closely followed it, what happened?

[00:02:47] Rory Dowie: In short, Nathan, the Democrats won control of both the House and the Senate and that was by a wider margin than most expected.

[00:02:55] Rory Dowie: On the latest associated press counts, Democrats hold 54 Senate seats to the Republicans 44 with Alaska and Mississippi still too close to actually call. In the house, it's 254 to 162 with about 19 still being counted. And I think the main thing for us really is that the Democrats managed to flip seven seats in the Senate and well over 40 and the house.

[00:03:18] Rory Dowie: So really a clean sweep for Democrats across the board.

[00:03:21] Nathan Sweeney: And that would be seen as quite substantial. So I suppose for listeners, they'll be wondering, what was the driver behind that?

[00:03:27] Rory Dowie: Yeah, really for us it was one thing and it's cost of living. You know, we're feeling that here at home in the UK and it's clearly an issue the other side of the pond in the US. The Middle East, and then the rising oil prices on the back of that have been the main drivers. But actually, interestingly, AI and data centres have been a genuine campaign issue this time as well. Clearly there is some idea that, data centres are also putting pressure on the cost of energy because clearly there's a lot of energy demand coming from that high AI demand. So that was also an issue this time around.

[00:04:00] Nathan Sweeney: Yeah, I suppose the question is, what's actually changed? Because the new Congress doesn't actually sit until January, so what's new?

[00:04:07] Rory Dowie: I think that's a really important point that new Congress takes its seats in January and the president still holds the veto.

[00:04:14] Rory Dowie: So this isn't a world where sweeping new legislation suddenly sails through. But I think for us, what it does mean is a more divided government. Congress now has the power to block the administration's agenda, to hold hearings, to launch investigations, for example. And again, that's why the market started to get a little bit concerned what that means for AI.

[00:04:34] Rory Dowie: Clearly we did see the market rally straight away on Wednesday when we had the results in, because there was less uncertainty. We had a bit of a clearer outcome, what was happening. But then obviously Thursday the market started asking itself, what does that then mean for technology policy, energy policy for example.

[00:04:50] Nathan Sweeney: So I think if we look at the market results on Wednesday, it was much of a relief rally. So we saw that kind of positive move and then Thursday suddenly the market sold off. So I suppose for investors, it'd be wondering why that dynamic, we saw markets going up and then selling off. So what was actually happening there?

[00:05:06] Rory Dowie: Yeah, the market shifted from asking who won to kind of what does that mean for AI and other industries and really the market focused on the data centre story. Because clearly that's what's been driving the market. Even on Wednesday when the broader market was up, the data centre builders and power equipment names were actually down.

[00:05:23] Rory Dowie: And on Thursday that really gathered momentum, that dynamic. We saw Nvidia falling over 9%, Micron, that memory name we've talked about down about 14% and other parts of the market off in a very strong double digits as well.

[00:05:37] Rory Dowie: Why data centre specifically? We think that's because that's where the physical bottleneck is. Several newly elected governors campaigned on pausing new data centre construction.

[00:05:46] Rory Dowie: Texas' Governor elect pledged an immediate moratorium. Ohio supports a conditional one unless developers cover utility costs. So you know those two states, that's where the majority of data centres are getting built. And clearly the market's now getting worried if you get a delay or even prevention of data centres, that means less data centre demand clearly downstream companies, the semiconductors, the power names that have been driving the market, clearly that's less demand for them.

[00:06:11] Rory Dowie: So investors are sort of getting ahead of that demand or potential cadence of that demand curve if you like Nathan.

[00:06:17] Nathan Sweeney: So I suppose the question people want to know is, is this the end of AI at all of this, kind of huge market moves for AI and people were questioning, particularly after the moves we saw last week, is money coming out of AI?

[00:06:29] Nathan Sweeney: Is there a a bubble? Is it deflating? So where do we stand on AI?

[00:06:33] Rory Dowie: Yeah, that's the billion dollar question and there's clearly a lot of debate in the markets. Remember the president still has a veto at the federal level, but much of this is decided state by state and most political analysts don't expect construction to be blocked for good.

[00:06:47] Rory Dowie: I think what the more likely outcome is we'll get delays and it'll be delays more likely than outright bans. Those big technology companies are still on track to spend close to $700 billion of capital expenditures this year. So clearly, that's probably the angle.

[00:07:01] Rory Dowie: I would highlight though, if we rewind a few years under the Democratic administration, that is where we had the AI wave really starting out.

[00:07:09] Rory Dowie: So back in 2021 - 2022, when Nvidia really started flying to the races in the stock market, that was kind of the start of the data centre build outs. Clearly we have had a Democratic government before and they have been positive with data centres, but clearly this time it's more of a political issue.

[00:07:25] Rory Dowie: We'll be watching it closely.

[00:07:26] Nathan Sweeney: Okay, so really the market is just really questioning AI, the amount of spend and the potential for that to slow a little bit next year given the change in politics and the likelihood that you get some local pushback on the amount of energy that is being consumed and permits may slow down.

[00:07:42] Nathan Sweeney: But this is all unknown to date. So I think, the market is just putting in a bit of a buffer there on some of those share prices.

[00:07:48] Nathan Sweeney: Finishing off Rory, what have our listeners got to look out for this week?

[00:07:52] Rory Dowie: The big one is US inflation on Tuesday Nathan. After that strong jobs number we had on Friday, markets have started to price a higher chance for a Fed rate hike in December, so we'll be watching those numbers closely.

[00:08:04] Rory Dowie: And then on the AI side, we've got continued earnings from some of those names right at the epicentre of last weeks volatility. CoreWeave that we spoke about on the pod a few weeks ago, and Nebius, two of those neo clouds which rent out AI compute. So watching those two names as well.

[00:08:19] Nathan Sweeney: Thank you, Rory.

[00:08:20] Nathan Sweeney: That's a very, very insightful update. Again, thank you to our listeners. I hope you really found that useful.

[00:08:25] Nathan Sweeney: If you've got any questions, please do send them in. We would love to bring them up, and wishing you all a great week ahead.