Wall Street put on some hefty gains after the Democrat sweep and some quick thinking gave traders the idea that having the government in gridlock and at each others' throats for two years might be good for business. That was Wednesday. Wall Street usually doesn't need much of a reason to rally, but, days and weeks ahead, once the Democrat agenda comes into focus, might offer a different perspective.
The Dow soared by more than three percent, led by gains in McDonald's (MCD) and Microsoft (MSFT), while the NASDAQ, even with a gain of nearly 1.5%, was the laggard, weighed down by concerns over data center delays and permitting that will almost certainly be a mainstay of Democrat policy.
Trump Media (DJT), parent of the president's Truth Social platform, took a vicious hit, losing nearly 25% on the day. The stock is trading at 4.50 per share, down more than 95% since its peak in February, 2022, so, most of the damage had already occurred prior to the Democrat landslide on Tuesday, much of it caused by the president himself, relentlessly "truthing" and prattling on about his plans and accomplishments, war-mongering and other inane topics.
Bottom line, while Mr. Trump is a two-time president and a rich man, his ego and hubris led eventually to his downfall. Tuesday's election results will render him the lamest of lame ducks, his power reduced to suggestions that the congress will overwhelmingly reject. He will be fortunate to last the remainder of his term. A generous contingent of Democrats are already lining up to chair investigative committees, looking into everything from Trump's crypto profiteering to insider trading in crude oil futures and his prosecution of the war with Iran. Subpoenas will be flying from the Capitol to the White House and the Pentagon. Trump's presidency will be damaged beyond repair.
For what it's worth, Wednesday's wild stock market ride expresses Wall Street's expectations that the congress will be so engaged in destroying the Trump presidency and his legacy that little attention will be paid to enacting new legislation. The president has already trotted out the "V" word, as in "VETO", to which the Democrats and some unhappy Republicans may ultimately respond with overrides. That is the hidden danger the country and Wall street faces: that the newly-empowered Democrats will use their power to whip up support for policies that may not be in the best public interest. After all, congress hasn't done much of anything to better the lives of everyday Americans for most of te past 50 years. There's scant hope that the incoming cadre of elected persons will be any different.
From an investment perspective, the government always is more or less a trifling matter. Wall Street might find itself more comfortable with old school attitudes, where things like profit, margins, and valuations actually matter more than the politics of the day. If that becomes the case, stocks might see multiple corrections in months ahead. After all, the ink on the ballots is barely dry. There's plenty of time for the governing body in Washington to make a complete mess of things. They've had plenty of practice, and, if recent events are a reliable guide, they're quite good at it.
Being even slightly cynical about the future of politics and American life doesn't require much effort. One only has to look back a few years to the foibles and failures of the Biden administration and the attendant congressional inaction to understand that Washington works largely for its own benefit, expanding its reach and power with an ever-increasing burden of rules, laws, regulations, taxes, and fees that undermine free enterprise and the American "can do" spirit. The degree to which the incoming Democrats manage to force their will on the people is yet undetermined, but it can be safely assumed that they will, the main question being the manner in which they do it. New legislation, much of it crafted as veto-proof, appealing to the softer Republicans in the House and Senate, will likely put limitations on free speech, AI build-out and data centers, business in general, and rights in particular. That's been the trend for the past few decades and the next congress probably won't stray far from that mandate.
As of Thursday morning, Democrats have already registered a huge majority of 240-147 in the House, with 48 seats still undecided, the votes continuing to be counted. In the Senate, the Democrat advantage is 54-44, with two seats remaining undecided. For all intents, the Republican party suffered a devastating, near-extinction-level blow on Tuesday and the resultant change in leadership, rhetoric, and attitude will not be pretty. While Wall Street may be enjoying a "gridlock" sugar high for the moment, looking past the immediate horizon is almost certain to be a bit more frightening. Little will be resolved over the remainder of 2026, but 2027 looks to be a challenge for survival and resilience in managing everyday life and investment portfolios.
Getting back to more mundane issues, the earnings parade continued on Wednesday night into Thursday morning.
After the close Wednesday, these companies reported third quarter earnings:
Coherent (COHR) - shares down 3% on EPS, revenue beat
ARM (ARM) - solid EPS and revenue beats, shares down 7% pre-market
Dutch Bros. (BROS) - EPS and revenue beats, shares down 11% on negative outlook
Qualcomm (QCOM) - EPS and revenue beats, shares down 11% on valuation concerns
Thursday, (before open):
Zillow (Z) - Top and bottom misses, shares down 6%
Snap (SNAP) - Revenue miss sends shares down 10%
Core Scientific (CORZ) - top, bottom beats, shares up 1%
Cigna (CI) - earnings call underway at 8:30 am, shares ahead by 3%
Molson Coors (TAP) - earnings call underway at 8:30 am, shares down 4%
Judging by stock futures, a mood swing seems to be underway approaching the opening bell Thursday. It will be interesting to see how long Wall Street's love affair with a Democrat majority and gridlock lasts. It's already turned negative on AI and data center buildout. It won't take long for that sentiment to spread to other sectors. The sugar rush may not survive the week, as Friday's Non-farm Payrolls for October will offer a different narrative, one that takes into account the possibility for another FOMC rate hike in about five weeks.
At the Close, Wednesday, November 4, 2026:
Dow: 53,356.48, +1,569.76 (+3.03%)
NASDAQ: 25,736.51, +364.50 (+1.44%)
S&P 500: 7,688.62, +119.70 (+1.58%)
NYSE Composite: 24,686.13, +379.08 (+1.56%)
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