Live Markets: Democratic sweep and tech selloff

Babcock International

27/10/2026 12:06

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DEMOCRATIC SWEEP AND TECH SELLOFF
The US midterm elections next week are among the key events on investors' radar, as shifts in Washington can alter expectations for fiscal policy, regulation and government borrowing, with implications across stocks, bonds, currencies and commodities.
Luca Paolini, chief strategist at Pictet Asset Management, analyses two scenarios that could significantly impact major asset classes.
“Together, worries about corporate taxation and AI oversight could trigger a marked sell off in equity markets, led by tech,” he says referring to scenario one, which involves a Democratic sweep, accompanied by strong performance from progressive candidates in former Donald Trump strongholds.
“We’d expect US equities to fall by 10-15%,” as investors will worry about the prospect of a hike in corporate taxes and increased AI regulation.
In scenario two -- a Republican majority in both houses -- “our preferred positioning would include being overweight US bank stocks versus global financials, a higher than index position in small-cap stocks versus the average large cap, and overweight allocations to US upstream oil and gas companies,” he adds.
“Currently, we see no reason to change our tactical asset allocation ahead of midterms,” Paolini says.
“However, some protection against these two scenarios appears sensible, given the solid equity market performance this year and the optimism baked into consensus analyst earnings forecasts.”
     (Stefano Rebaudo)
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EARLIER ON LIVE MARKETS
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SOFT START, FTSE DRAGGED LOWER BY HSBC CLICK HERE
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