Bloomberg Surveillance: Tech Selloff, Election Results, and Economic Trends

Market Outlook and Valuations

• 🎯 High valuations and mid-teen earnings growth expectations for the S&P 500 create a high bar for the market in 2026.
• 💡 The key questions for the market are whether AI productivity will further boost earnings and if the liquidity environment will continue to support multiple expansion.
• ⚠️ Growth rates for the Mag 7 are decelerating, placing more pressure on the remaining 493 companies to perform and broaden the market rally.
• 📉 The market has seen low-quality, narrow rallies, with speculative parts of the market showing strong leadership, which is viewed as unsustainable.

Alternative Assets and Credit

• 💰 Bitcoin is seen as a function of liquidity and fears of dollar debasement, with its recent volatility reflecting tightening liquidity.
• 📈 Infrastructure is highlighted as an attractive alternative asset class offering high single-digit to low double-digit returns with less correlation to equity markets.
• 🏦 In the bond market, 2-year Treasuries offer a reasonable return, while caution is advised in credit due to potential embedded risks and widening high-yield spreads.

Election Analysis and Political Landscape

• 📊 Democratic wins in Virginia and New Jersey are seen as a positive sign, with candidates exceeding expectations and bringing along down-ballot races.
• 🗳️ These election results are a mix of dissatisfaction with Trump and Democratic candidates presenting their own resonating plans, with Democratic turnout surging.
• ⚖️ The Supreme Court will hear arguments on Trump's unilateral decision to impose global tariffs, testing presidential power and executive authority.
• 🔑 Lessons from the elections include the importance of voter enthusiasm, the need for Democrats to field candidates suited to different regions, and that Donald Trump can be a liability when not on the ballot.

Economic Data and Inflation Trends

• 📉 Alternative data sets indicate nearly 155,000 job cuts announced in October, with ADP job creation concentrated in large companies.
• ⚠️ State WARN notices are running at their highest pace since September 2009, suggesting a struggling labor market at the margin.
• ⚡ The AI data center boom is questioned, with concerns about it being a potential bubble and the significant electricity consumption contributing to inflation.
• 📦 Tariffs have largely passed through the supply chain, and companies are now dealing with excess inventory, leading to discounting and potentially the opposite effect on inflation.

Consumer and Retail Trends

• 📚 A growing number of college students are pursuing double majors to improve job security, with graduates holding two majors being significantly less likely to face layoffs or pay cuts.
• 🪙 Businesses like Burger King are struggling with a penny shortage, leading to cashiers needing to perform split-second rounding for cash-paying customers.
• 🎁 High demand for K-pop merchandise due to popular media has led to production and shipping challenges, potentially impacting Christmas availability.