This week’s midterm elections may have transformed an under-appreciated political risk into a meaningful market catalyst.
The Democratic Party won control of both chambers of Congress following the costliest U.S. election on record and a midterm-high in early voting, signs that voters and donors in both parties were unusually motivated to win. In our view, this reflects the “elite overproduction” phenomenon Dr. Peter Turchin and his colleagues use to describe the destabilizing competition among elites chasing too few positions of power or socioeconomic status.
The risk is that disenfranchised elites increasingly turn to populism as a remedy for failing to achieve via traditional means. It remains our view that the 2030s are highly likely to feature significant redistributive policies such as wealth taxes and trust-busting. The 2028 general election cycle looms particularly large, while increased political scrutiny could slow data-center construction and disrupt the AI-driven investment boom.
Corporate results revealed another emerging risk. Apple and Palantir beat estimates, and Shopify delivered solid growth, yet all three stocks were punished because investors had set the bar even higher. As we often remind investors, “expectations are the root of all heartache.”
Could rising political risk and increasingly difficult corporate expectations trigger broader market de-risking?
Explore 42 Macro’s research solutions to follow the signals that matter and adjust portfolio exposure as conditions evolve.
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