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Today's Observation
On the first trading day after the US midterm elections, US stocks did not decline due to Washington re-entering a divided government; instead, there was a comprehensive rise.
The Democratic Party gained control of both the Senate and the House in this midterm election, ending the Republican Party's simultaneous control of the White House and Congress. With Trump still serving as president, the United States will enter a phase of "Democratic Congress, Republican White House" divided government starting in early 2027.
On November 4, the Dow Jones Industrial Average rose by 3.03%, increasing by 1569 points in a single day; the S&P 500 index went up by 1.58%, the Nasdaq index surged by 1.44%, and the Russell 2000 index climbed by about 1.6%. The market initially traded on the elimination of electoral uncertainty and the possibility that a divided government might limit large-scale fiscal and policy changes.
However, the increase in the index does not mean all sectors benefited. Healthcare services, clean energy, and some interest-rate-sensitive assets became the winners on the first day; oil, defense, and companies highly associated with Trump and Musk faced obvious pressure.
Therefore, the first day after the midterm elections was not simply about "Democratic victory, US stock rise," but rather a market readjustment of policy directions across different sectors based on the anticipated budget, healthcare, energy, war, and regulatory directions for the next two years.
Data Minute
The Democratic Party has gained control of the Senate and the House, and the US has re-entered a divided government;
The Dow Jones Industrial Average rose by 3.03%, closing at 53356.12 points, an increase of 1569.40 points in a single day;
The S&P 500 index rose by 1.58%, closing at 7688.62 points;
The Nasdaq index rose by 1.44%, closing at 25736.51 points;
The Russell 2000 index rose by about 1.6%, with small-cap stocks rebounding simultaneously;
The yield on 10-year US Treasury bonds fell by about 6.6 basis points to 4.88%, as the market anticipates that a divided government might limit fiscal spending;
Brent crude oil fell by about 8.7%, closing at $94.62 per barrel;
HCA Healthcare rose by 10.3%, becoming a representative winner in the healthcare services sector;
First Solar rose by 4.6%, Enphase Energy increased by 3.7%, with the clean energy sector receiving expected policy support;
Exxon Mobil dropped by 4.6%, ConocoPhillips fell by 5.2%, with oil stocks declining following the drop in oil prices;
Lockheed Martin fell by 6.9%, Northrop Grumman decreased by 4.5%, General Dynamics fell by 2.6%;
Trump Media dropped by 24.5%, becoming one of the most significantly declining politically related assets of the day;
Tesla fell by 3.3%, SpaceX dropped by 3.8%;
AMD rose by about 1% after announcing strong growth expectations, indicating that the AI sector has not experienced a uniform decline.
MSX View
This market reaction can be divided into three main lines. The first line is healthcare services. The Democratic Party has included the restoration of Affordable Care Act subsidies and the reduction or postponement of previously enacted Medicaid spending cuts in its policy agenda after regaining control of Congress. Hospital operators, which particularly rely on commercial insurance, Medicare, and Medicaid payments, saw an initial increase in the revenue visibility of related companies.
HCA Healthcare's single-day rise of 10.3% reflects investor expectations that the Medicaid reimbursement pressure hospitals face in the future may decrease. However, this is still only a policy expectation. With Trump continuing to control the White House, the Democratic Party would still have to contend with presidential vetoes, budget negotiations, and intra-party disagreements to truly reverse existing healthcare cuts.
The second line is clean energy. The rises in First Solar and Enphase reflect the market's belief that clean energy tax credits, federal funding, and project approvals may receive more protection after the Democratic Party takes control of Congress. Congress can also use its budget, hearings, and oversight powers to limit adjustments by the executive branch to some new energy policies. The third line involves oil, defense, and politically related assets. Brent crude oil fell by nearly 9% in a single day, becoming the direct cause of the decline in energy stocks. The market believes that Democratic control of Congress may enhance oversight of the war in Iran and increase the likelihood of pushing for ceasefire negotiations. The logic for defense stocks is similar. Once the Democratic Party controls Congress, it can influence military spending and war policies through budget approval, hearings, and investigations, but foreign and military decisions are still primarily directed by the president and the executive branch. Therefore, the declines in Lockheed Martin and Northrop Grumman appear more as a style adjustment.
The declines in Trump Media, Tesla, and SpaceX reflect the market's re-evaluation of political relationships and regulatory risks. The Democratic Congress has the power to investigate, issue subpoenas, and hold hearings, which may enhance scrutiny of Trump's business interests, government contracts, and Musk's companies. However, the orders, revenues, and product competitiveness of these companies have not changed immediately due to a single election; subsequent performance will still revert to their respective fundamentals.
The AI industry chain also needs to be viewed separately. Democratic control of Congress may increase scrutiny of electricity usage, construction permits, antitrust issues, AI safety, and platform responsibilities for data centers, thus imposing higher uncertainty on data center projects with high capital expenditure and strong policy dependence. Nevertheless, the Nasdaq still rose by 1.44% that day, and AMD also climbed due to performance outlooks, indicating that the market has not denied AI demand but is distinguishing between companies that have already realized profits and those primarily dependent on future expectations.
Overall, the short-term benefits from this election for the market mainly stem from the reduction in uncertainty, the decline in US Treasury yields, and dropping oil prices, rather than Congress being able to immediately introduce new economic policies. A divided government may limit extreme policy changes while also reducing the probability of large-scale fiscal expansion; however, it may also increase the risks of budget deadlocks, government shutdowns, and debt ceiling negotiations. For US stocks, the environment over the next two years may see less policy change but increased political maneuvering.
What remains to be observed is whether the Democratic Party can develop executable policies regarding healthcare budgets, clean energy funding, defense spending, and AI regulation, while also monitoring whether oil prices and US Treasury yields maintain their post-election trends.
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Risk Warning: Macroeconomic and US stock market volatility is significant; the content of this article is for academic and research observation reference only by the MSX Research Institute and does not constitute any investment advice.
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