Following the Democrats’ victory in the United States midterm elections, global stock markets rose on Wednesday while the US dollar lost value.
With Democrats taking control of the Senate and the House of Representatives, investors grew concerned about the possibility of tougher rules for the artificial intelligence sector.
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For President Donald Trump, the result is a significant political setback. Democrats also won by wide margins in areas known for decades as Republican strongholds, an unexpected shift that appears to have surprised some investors.
Deborah Cunningham, chief investment officer for global liquidity markets at Federated Hermes, said a Democratic victory in both chambers had not been expected at the start of the year. In her view, this Democratic wave will leave the federal government divided on most issues.
Cunningham explained that divided government usually makes it harder to pass new laws. Financial markets, she said, have traditionally viewed such a situation favorably because it reduces uncertainty.
Polls show support among Democratic voters for greater oversight of artificial intelligence. With that in mind, investors expect closer scrutiny of the sector by a Democrat-controlled Congress.
The initial reaction in Asia was a decline in shares of companies linked to artificial intelligence. At the same time, bonds and currencies seen as safe investments, including the Swiss franc, rose.
As most of the voting results were released, markets began to recover. The MSCI All-World global index gained 0.13%, while Europe’s STOXX 600 index rose 0.5%.
US stock futures also moved into positive territory after falling by as much as 2% overnight.
On the European Tradegate platform, shares of Tesla and SpaceX, companies linked to billionaire Elon Musk, fell by about 4.5% to 5%. Shares of other major technology companies saw smaller declines, ranging from 0.3% to 0.9%.
Kathleen Brooks, head of research at XTB, described the impact of the results on markets so far as relatively limited. She said investors would focus on the result’s concrete implications for economic policy rather than the uncertainty that surrounded the elections.
The rapid growth of artificial intelligence has been one of the main drivers of global markets in recent years. Technology companies have invested large sums in data centers and computing capacity, making investors particularly sensitive to measures that could slow the sector’s expansion.
The election result could also affect US fiscal policy and major economic sectors, including defense, healthcare and banking.
Futures for the Russell 2000 index rose 0.7% after previously falling 1%. The index includes smaller companies and is more closely tied to the US domestic economy.
