As we published this the Senate race in Mississippi, which Donald Trump last won by 23 percentage points, was too close to call. IN GEOLOGY, AN earthquake causes a tsunami. In American politics, a blue tsunami is causing an earthquake. In midterm elections on November 3rd the Democratic Party swept all before it. Ruby-red Texas elected a blue senator for the first time in decades and crimson Kansas for the first time in nearly a century.
Markets also like the inevitable stasis of divided government—at least in America, where the business environment is already favourable (political paralysis is more of a problem in places like Europe, where the underlying conditions are not pro-growth). If anything, oversight from a reinvigorated Congress will probably make it a bit harder for the president to raise tariffs, wage wars and gut the public sector. Fights over the budget are inevitable, but then they would have been anyway. And Democrats have tended to be less willing than Republicans to court sovereign default by blocking rises to the federal debt ceiling. Still, placidity on the surface conceals a bit more churn beneath, especially in equities. One loser is Elon Musk. Democrats will return the favour by poring over the government’s contracts with his carmaker, Tesla, and rocketry firm, SpaceX. Other federal contractors do not inspire as much personal animus among Democrats. But they can still expect scrutiny now that the opposition party controls the purse strings, especially in industries that lefties find objectionable. Private-prison operators such as CoreCivic and GEO, both of which have assisted Mr Trump’s heartless mass-deportation effort, shed value on fears that the incoming Congress would squeeze the immigration budget.
The right-wing sometime-trillionaire wasted nearly $500m helping elect Republicans in this year’s races. Their share prices fell by 3% and 4%, respectively. Democrats are also unlikely to accept Mr Trump’s request to spend $1.5trn on defence, hitting Lockheed Martin, Northrop Grumman, RTX and other armsmakers.
Amazon and Microsoft were up by more than 6%. Alphabet gained over 3%. The second group of losers comprises firms whose fortunes depend wholly on the buildout of artificial-intelligence data centres. These installations were supported by many Republicans—until they provoked a backlash which the Democrats ruthlessly exploited. Three of the four states which accounted for half of planned new capacity—Georgia, Ohio and Texas—have Republican governors. From next year all four will have Democratic ones. In Texas, the top destination for data centres, the governor-elect, Gina Hinojosa, campaigned on a promise to impose an immediate moratorium on their construction. Conversely, the blue wave has lifted industries that can count on Trumpian budget cuts being unwound (health care and clean energy) and large spenders on data centres. Even Meta, led by the manospheric Mark Zuckerberg, edged up. The tech bosses can expect to be hauled before Congress for adversarial hearings, both about AI and their obsequiousness towards Mr Trump. But at least their next earnings calls may turn out to be more amicable.
Big tech’s “hyperscalers” may now spend less, preserving their margins, while facing less competition for their existing capacity from CoreWeave and the like.
