US Stocks and Dollar Fall as Democrats Win Control of Congress in Midterm Elections

Tough economic times for many voters, with rising prices for most things, have been an important driving force behind the Democrats' election victory, says Elisabet Kopelman, a US economist at SEB.

It's the wallet issue that decided it. It usually does, she says.

But that doesn't necessarily mean voters love the Democrats' policies. Rather, it's a protest against rising prices and the war in Iran, as I interpret it, she says.

Brake on AI investments

According to Kopelman, the downward pressure on technology stocks can be explained by the fact that Democrats in Congress and newly elected governors in states such as Georgia and Texas have said they want to slow major investments in data centers and other AI infrastructure.

People think AI expansion is going too fast and don't want these data centers where they live. People are concerned about the development, she says.

This could also be behind the downward pressure on the dollar, according to Kopelman, as a poorer outlook for AI investments in the US is causing money to move away from Wall Street's tech giants.

This could actually benefit European stocks, she says.

Market interest rates are also falling somewhat as the results are confirmed in newly counted districts.

Now we have a deadlock between Congress and the White House. So there will be no new major tax cuts, and there will be no major fiscal reforms, she says.

Cryptocurrencies are falling

She also expects the Trump administration's massive investments in defense to be slowed by a Congress controlled by Democrats, which would mitigate the risk of a runaway budget deficit in the US.

However, interest rate movements are limited. The yield on a ten-year US Treasury bond, which has risen almost 0.80 percentage points since the beginning of the year, falls 0.04 percentage points to 4.94 percent.

Cryptocurrencies are also falling. The Democratic majority in Congress increases political uncertainty for the sector. Bitcoin falls almost 3 percent to its lowest price since September.

However, the world market price of oil has not moved significantly in response to the election result. It is hovering around $103.50 per barrel after falling in recent days on hopes of progress in a new round of talks between the United States and Iran.