The Democratic sweep of both chambers of United States (US) Congress on 3 November produced two of the most volatile sessions of the year in successive days. On Wednesday the Dow Jones Industrial Average gained 1,569 points, or 3.03%, its best post-midterm day since 1982 according to financial intelligence solutions firm, CFRA Research, while the S&P 500 added 1.58% and the NASDAQ Composite 1.44%. By Thursday evening, at the time of writing, that rally had been reversed in full, led by a sharp decline in semiconductor stocks, and the CBOE Volatility Index (VIX) had recorded its largest one-day jump in more than two years. Oil followed a similar path, but in the opposite direction, falling 8.3% on Wednesday before recovering part of the loss on Thursday.
The size of the swings is striking because the election result, itself, was widely expected. Prediction markets such as Kalshi and Polymarket were good indicators of the markets’ expectations. These prediction markets allow people to buy contracts that pay out $1 if an event occurs, the contracts are priced at the probability of an event happening, so a contract trading at 75 cents implies a 75% probability. –Going into the vote, those prices gave Democrats roughly a 94% chance of winning the House and a 75% chance of taking both chambers. While the outcome was anticipated, the market’s response to it was not, and two days of trading have now produced two different interpretations of that result.
The two interpretations of a democratic win
The first interpretation, on Wednesday, separated the companies supplying the AI build-out from the companies paying for it. Investors expect a Democratic Congress, together with candidates opposed to data centre expansion, like the candidates who won in Texas, to slow new construction. That was read as negative for artificial intelligence (AI) infrastructure suppliers, with CoreWeave down 9.9% and IREN 11.2%, but positive for the largest AI platforms, since a slower build-out makes their existing capacity scarcer and eases pressure on capital spending that has risen to more than $740 billion this year from around $400 billion last year, increasingly funded by borrowing. Amazon gained 7.4% and Microsoft close to 7%, and on Wednesday, Reuters estimated that the five largest technology companies were on course to add more than $750 billion in combined market value in a single trading session.
The second interpretation came on Thursday, as markets recognised that the two sides of that trade are the same income stream. Capital spending by the platforms is revenue for the chipmakers, and the earnings growth that has justified technology valuations through 2026 depends on that spending continuing to rise. Prominent Wall Street tech analyst, Dan Ives, brought forward his expectation that Big Tech capital spending growth will now peak earlier, in 2027, citing the political map, Texas in particular. This statement saw selling that began in chip names like AMD, Micron, Broadcom and Nvidia, and spread to the platforms that had led Wednesday’s gains as investors moved towards consumer, healthcare and financial stocks. The relief that capital spending might be contained lasted a single session before the market priced what containment means for the companies whose revenue stream it is hurting, resulting in a severe selloff of AI, chip and data-centre infrastructure stocks, that wiped out trillions in market value.
Treasury yields rallied
Bonds, post-election, have been more consistent. Treasuries rallied on both days, taking the 10-year Treasury yield to around 4.85% and the two-year lower still, as investors concluded that divided government makes further fiscal expansion harder to pass, a view multinational banks, UBS and Deutsche Bank, both expressed, and as equity volatility added demand for safety. As such, the gold price rose on both days. Expectations of tariff relief, and the inherent inflation impact, should be more restrained, however, because Democrats lack the two-thirds majority needed to override a veto, and the duties still in place rest on Section 232 and 301 authority, which the president already holds.
Oil plummets on optimism alone
Oil shows the post-election assumptions being made most clearly with nothing having changed in the physical market on Wednesday, no US-Iran ceasefire was announced, no agreement was signed, and a senior Iranian official said that substantial gaps remain in negotiations. What changed, however, was the political reading of the war, after President Trump attributed the Republican losses to the price of gasoline and Vice President JD Vance named the conflict as the reason for the defeat. The market inferred that an administration which had lost Congress over fuel prices would now seek an exit from the war and priced in that exit within one session. On Thursday prices recovered on doubts over whether the administration will pursue a deal at all, which is the same uncertainty that existed before the vote, and markets priced in a reverse.
An ongoing theme
Last week we argued, using Brazil’s runoff and the rally that followed Cyril Ramaphosa’s rise in 2018, that markets, riskily, priced in the destination of a political event without allowing for the length of the journey. This week compressed that lesson into 48 hours. Prediction markets were right about the result, investors were right about the direction of policy, and positioning was still caught out twice, because neither a contained AI build-out nor a negotiated peace deal has happened yet, and both carry consequences that take quarters rather than sessions to show up in earnings or barrels of oil. For clients with dollar, energy or technology exposure, the protection that counts is the one put in place on the evidence of what has actually happened, not on the market’s first reading of what an outcome is likely to mean.
Turning to the markets
Key themes:
- The market’s flight to safety pulled core Treasury yields sharply lower
- A brutal AI- and chip-led rout erased Wall Street’s post-election bounce
- Gold is holding above $4,050/ounce, and is higher on the week
- The rand has shrugged off Wall Street’s rout, helped by a softer dollar and firmer bullion
Bonds
The US 10-year Treasury yield eased to 4.84% on Thursday, down around six basis points on the day and some nine basis points on the week, from 4.93% at last Friday’s close. With the Fed having held its target range at 3.75% to 4% on 28 October the move was driven by safe-haven demand rather than being policy-directed, and it was concentrated on shorter-term bonds. Two-year yields fell roughly 12 basis points as the sell-off sharply cut the odds of a December hike, until Thursday a hike was priced in as more likely than not. The long-term yields lagged, held back by fresh fiscal-supply concerns after the Democratic sweep of both chambers of Congress, producing a pronounced bull-steepening of the curve (where short-term interest rates fall faster than long-term ones).
Germany’s 10-year Bund yield slipped about four basis points to 3.25%, its lowest level since late August and lower again on the week, as the technology and AI equity sell-off drove European investors into core duration bonds. With the ECB comfortably putting rates on hold at a 2.5% deposit rate, Bunds are trading as the region’s cleanest safe haven asset class and are the anchor for the broader euro-area curve.
The United Kingdom’s (UK’s) 10-year Gilt yield edged down to 5.15%, a two-month low and modestly lower on the week. That Gilts rallied on the very day the Bank of England (BoE) raised its Bank Rate a quarter-point to 4.00%, an eight-to-one vote, accompanied by a warning that UK inflation will approach 5%, underscores how fully the hike was priced in and how dominant the flight-to-quality assets has become; shorter-term bonds are carrying the BoE’s hawkishness while the longer-term bonds are following the global duration rally of rising prices and falling yields.
South Africa’s 10-year SAGB rallied hard, the yield falling roughly nineteen basis points on Thursday to 8.42%, its lowest level in over two months and comfortably lower on the week. Three forces are aligned: the global duration rally, a constructive reading of last month’s Medium-Term Budget Policy Statement (MTBPS), and the credibility dividend from the South African Reserve Bank’s (SARB’s) move to a 3% inflation target. In the 21 October MTBPS, Finance Minister, Enoch Godongwana, trimmed South Africa’s 2026/27 consolidated deficit to 3.9% of GDP and nudged the gross debt estimate down to 78.4%, presenting a more optimistic debt trajectory that the market has rewarded with a lower risk premium. The repo rate sits at 7.25% (prime 10.75%) after September’s hike, and the SARB’s final meeting of the year on 19 November will be finely balanced: with September CPI at 4.5% but headline inflation expected above 5% into early next year, the committee is split between a final 25-basis-point hike and a hold.
Equities
Thursday was the worst session on Wall Street since April 2025. The S&P 500 shed 4.36% to 7,353, the Dow fell 1,833 points, or 3.44%, to 51,523, the NASDAQ Composite collapsed 5.52%, its steepest single-day fall in nineteen months, to 24,315, and the NASDAQ 100 dropped a still heavier 6.36% to 26,630, leaving the NASDAQ Composite roughly 14% below its record and firmly in correction (a sustained and clear decline of between 10% and 20%). The broader Dow Jones Composite fell 3.18%. The damage was concentrated in AI-related stocks but was still systemic with all eleven S&P sectors falling. Technology, however, dropped more than 7%, and the Philadelphia semiconductor index (SOX) plunged about 12% in its second-largest decline on record, with Nvidia off 9%, Broadcom down 10% and Micron, AMD and Marvell each shedding roughly 16% to 18%. The trigger was the Democratic sweep of Congress, which revived fears that the AI data-centre build-out could be slowed by energy, emissions and antitrust pressure, and compounded by renewed debt-ceiling risk. Thursday’s slide wiped out a post-election bounce that had briefly carried the Dow above 53,300, leaving the S&P down about 3% on the week, the NASDAQ down roughly 4.4% and the Dow only marginally lower as money rapidly rotated out of the crowded AI complex rather than leaving equities wholesale. The VIX spiked toward 28, up from 19 a week ago.
Korea’s KOSPI fell as much as 8.5% at this morning’s open and triggered a Level 1 circuit breaker after dropping below 5,000, with SK Hynix off more than 12% and Samsung down 10% as the memory and AI-hardware complex bore the brunt of Wall Street’s rout, but clawed back to around a 3.9% loss near 5,170 later in the session. Japan’s Nikkei 225 is down about 5.5% near 57,700, and the MSCI AC Asia Pacific index is off roughly 3.5%. Crucially, US index futures have turned higher as Asia cuts its losses, with Nasdaq 100 futures up over 1% and the S&P contract back in the green, a tentative signal that the AI fall may have found a short-term floor rather than plummeting lower.
European equities closed on Thursday before the worst of the US move and so escaped the bulk of the damage, with the Euro Stoxx 50 easing around 0.6% to roughly 6,225 and only modestly lower on the week. With Asia off its lows and US futures firmer, today’s open may prove more orderly than the overnight headlines implied.
The UK’s FTSE 100 slipped about 0.4% to around 10,780 on Thursday, holding just below the record highs set in recent sessions and broadly flat on the week. Its heavy weighting in energy, miners and defensives, and its minimal exposure to the US mega-cap technology names at the centre of the sell-off, leaves it among the better-insulated major markets, and a steadier futures backdrop should limit the downside at today’s open.
The JSE All Share closed sharply higher on Thursday, up 3.67% at 113,286 and back within reach of record territory, led by gold and platinum miners as bullion held above $4,050/ounce and the dollar stayed soft, the local market, like the FTSE, benefits from a resource-and-financials mix that sidesteps the global tech complex. That strength will be tested at this morning’s open: with Asian bourses lower, albeit off their worst levels, the JSE should give back ground, with industrials, banks and the Naspers/Prosus technology proxy most exposed, even as the gold-mining counters likely outperform and cushion the index-level damage.
Commodities
Spot gold is trading near $4,053/ounce, down around 0.9% overnight but still higher on the week, having rebounded strongly from the one-year low it struck late last week. Safe-haven demand from the equity rout, a softer dollar and a pushed-back Fed timeline are all working in bullion’s favour.
Brent crude is firmer at around $99.60/barrel, up over 1% on Thursday as a renewed Middle East risk premium returned to the market, and oil prices are holding broadly in the $98/barrel to $100/barrel range.
Currencies
The US Dollar Index is little changed at 101.67, marginally softer on the week from 101.88. The dollar is caught between safe-haven demand and the Wall-Street rout’s dovish knock to Fed expectations, with the funds range held at 3.75% to 4%, a December hike that had almost been a certainty, is now in doubt, and the net effect has been a currency firm against risk-sensitive crosses but unable to rally decisively, which is precisely what has given emerging-market currencies room to hold their ground.
The euro is steady around $1.12/€, little changed on Thursday and the week, with the European Central Bank putting rates on hold and the $/€ pair taking its cue from the dollar leg rather than any European catalyst.
Sterling is firm around $1.344/£, broadly flat on Thursday but the best-supported of the majors over the past month, buoyed by the BoE’s rate increase to 4%. The rate-differential story continues to favour the pound over the euro.
The rand has proved notably resilient. It is trading at R16.52/$, R18.51/€ and R22.20/£, up about a third of a percent Thursday but still firmer by around 0.6% on the week, having round-tripped from near R16.37/$ midweek back toward R16.52/$.
*Please note that all information is at the time of writing.
Key indicators:
USD/ZAR: 16.49
EUR/ZAR: 18.42
GBP/ZAR: 22.09
BRENT CRUDE: $97
GOLD: $4,080
Sources: CNBC, Reuters via Investing.com, Fortune.com, NBC News, Yahoo Finance and Investing.com