For all the federal election related takes, remember that
1. Market price changes are changes from what was expected before compared to what is expected now. And not even only in regards to the asset itself, but with respect to comparative change in other assets as well.
2. conventional wisdom when the branches of government are divided, less change comes from the government, so you can expect that your expectations for the future will remain stable, and that confidence reduces risk aversion, resulting in higher pricing.
Therefore, the market going down cannot be attributed purely to a question of who is in charge, because the democrats can't pass anything unless they get a nice number of Republicans on their (possible I suppose, but I don't think anyone is expecting that right now). But it could be attributed to expectations of what Republicans would do vs now that they can't.
Besides, it's basically impossible (or at least for layman, who knows if you're a market maker?) to accurately attribute a day's market behavior to any event, with a compelling causal explanation (sometimes your attribution could also be explained to have the opposite effect than the one you're trying to explain) and not ignoring alternate possible explanations.
It's kinda annoying when even otherwise serious people invoke the market movement of a day as an meaningful event that can be explained (notwithstanding that by tomorrow the effect might have reversed). But unfortunately business news like CNBC promotes that kind of thinking.
I always find these market cap numbers misleading. The US stock market isn't "worth" $2.5T less. If you multiply the marginal share price by the total number of shares, you get a number that's $2.5T lower. That is something different. E.g., if you tried to sell all Nvidia shares at once, you'd never get anywhere near ~$4.5T (just as buying them all would cost far more).
This is definitely scary, but not the end of the world (yet).
The S&P500 is still up ~7% YTD, and 5y CAGR of 9.4% before dividends, in line with historical norms.
This is primarily a decline in tech: week over week, the S&P is -4.5% (SPX), but the S&P excluding tech is +0.1% (SPXT).
Right now, this looks like speculation that tech will reduce capex after Q4 earnings (Nvidia, Micron, Sandisk, AMD all down >2x vs the S&P). But it'll take time to tell; most just announced Q3 a week ago.
All this to say: expect volatility, but no need to panic.*
There's a lot of conjecture about how the midterms have caused the drop today but I can't help but think it may just be a convenient coincidence. Yesterday was one of the largest bumps of the year and by yesterday it was already known that Democrats were taking control.
Is this just the start of the fall that many people have been predicting for months? Did something materially change in the Democrats' stances or policies since yesterday? Or is something else unwinding entirely?
Sounds scary until you realize that this happens about once per year on average. If this happens again tomorrow and a few more times in the few couple weeks that would be bad, but as of now it's notable but not a huge deal.
Inflation. When inflation is high, people want change. The democrats won because voters rejected inflation. (Which is the same reason Trump won in 2024, BTW, inflation was high, so voters wanted change). Anyway, if the democrats want to keep power in 2028, they have to deal with inflation, and deal with it hard and fast. That means (much) higher interest rates, lower government spending, and, possibly, tax increases. All of these make stocks go down.
Josh Johnson has a joke about how little this matters for the average person. How trillions can be lost overnight and your everyday Joe sees no changes.
Interesting how the coverage of midterm elections was flagged with many users talking about how politics are not a hacker worthy topic but this somehow seems to be
Everybody who has been really angry with Elon Musk because he is a multi billionaire and that means he stole their money, are they now overjoyed with gratefulness for getting billions and billions of their stolen money back today?
America desperately needs January to come around fast. We need some level headed sensible people running the country. We need to elect more socialists to knock these tech companies down hard. Power to the people and fuck all this AI shit.
As usual, I was right about the market but way too early. I sold all of my AI-exposed stocks last year, as I knew the investment going into it couldn't be recouped in a reasonable time. If I'd held longer, I'd be up about 2x on those shares even if I'd only sold in a panic yesterday.
But, it also means I can probably reinvest in some of those stocks now that a correction is in progress. There are some excellent tech companies with strong leadership and strong growth (e.g. ARM) that have been too expensive for a long time; still too expensive, but getting closer to reasonable.
Selling AI stocks before year-end makes sense, right? New Congress, new House take over in January. Cost of living so tax hikes next year. Better to lock in gains now than pay more later? Besides cash is now bringing more than 4% pa
$2.5T has been wiped from US stocks
(finlaws.substack.com)161 points by madihaa 23 hours ago | 156 comments
Comments
1. Market price changes are changes from what was expected before compared to what is expected now. And not even only in regards to the asset itself, but with respect to comparative change in other assets as well. 2. conventional wisdom when the branches of government are divided, less change comes from the government, so you can expect that your expectations for the future will remain stable, and that confidence reduces risk aversion, resulting in higher pricing.
Therefore, the market going down cannot be attributed purely to a question of who is in charge, because the democrats can't pass anything unless they get a nice number of Republicans on their (possible I suppose, but I don't think anyone is expecting that right now). But it could be attributed to expectations of what Republicans would do vs now that they can't.
Besides, it's basically impossible (or at least for layman, who knows if you're a market maker?) to accurately attribute a day's market behavior to any event, with a compelling causal explanation (sometimes your attribution could also be explained to have the opposite effect than the one you're trying to explain) and not ignoring alternate possible explanations.
It's kinda annoying when even otherwise serious people invoke the market movement of a day as an meaningful event that can be explained (notwithstanding that by tomorrow the effect might have reversed). But unfortunately business news like CNBC promotes that kind of thinking.
The S&P500 is still up ~7% YTD, and 5y CAGR of 9.4% before dividends, in line with historical norms.
This is primarily a decline in tech: week over week, the S&P is -4.5% (SPX), but the S&P excluding tech is +0.1% (SPXT).
Right now, this looks like speculation that tech will reduce capex after Q4 earnings (Nvidia, Micron, Sandisk, AMD all down >2x vs the S&P). But it'll take time to tell; most just announced Q3 a week ago.
All this to say: expect volatility, but no need to panic.*
*(Unless you're in TQQQ. Then panic.)
Is this just the start of the fall that many people have been predicting for months? Did something materially change in the Democrats' stances or policies since yesterday? Or is something else unwinding entirely?
It's interesting reading the panic then in the comments, and yet now the nasdaq is up 65% from those lows, even with today's drop.
"Why are divorces so expensive? Because they're worth it"
As someone not terribly political, all I have is "ouch, my bank balance!" :) but this too shall pass.
Nasdaq plummets 4% into correction territory
https://news.ycombinator.com/item?id=50381623
It will be a long time required here, investigating all corruption that has been happening.
Inflation increase should be viewed as a mafia in charge of a country.
But, it also means I can probably reinvest in some of those stocks now that a correction is in progress. There are some excellent tech companies with strong leadership and strong growth (e.g. ARM) that have been too expensive for a long time; still too expensive, but getting closer to reasonable.
Anthropic and OpenAI will disintegrate and vanish in the mist.
That's all folks!!!