Election Results and Markets: What They Mean, and What to Do About It

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Voters handed Democrats control of both the House and the Senate during Tuesday’s Midterm elections. Stocks rallied on Wednesday, then fell sharply on Thursday, led by AI and technology companies. Both events are real. Neither diminishes our fundamental perspective on maintaining a disciplined, long-term investment approach. Our message is consistent: avoid making investment decisions based solely on short-term headlines.

What the election results do and don’t mean

What they do mean. Democrats won the House and the Senate, flipping seven Senate seats, including long-held Republican states like Texas and Kansas.1 In January, Washington moves from one-party control to a more divided government. The President can still veto bills, but he will have a harder time passing new legislation, and Congress will likely oversee the administration more closely. Voters cited the cost of living as a top concern.1

What they don’t mean. This is not a sudden change in the economy. Nothing in the results immediately changes tax rates, interest rates, or corporate earnings today. A president’s party losing ground at the midterms is normal, and historical data indicates that since 1930, the S&P 500 has gained an average of 14% in the year after midterm elections, and 8.8% even in years when the president’s party lost the House.2 Past results are no guarantee, and this year’s margin was bigger than usual, but gridlock is something markets have experienced many times before. It often means fewer big policy swings in either direction. Markets also tend to prefer certainty, and the outcome is now known.

Why the AI sell-off happened

If the election isn’t a problem for the overall economy, why did stocks drop so sharply on Thursday? The decline appeared concentrated in technology and AI-related shares, although market moves can reflect several factors at once.

  1. Expectations are high over the long term. Over the past two years, AI-related companies have been significant contributors to stock market gains. Prices for these companies reflected a lot of optimism as AI becomes a bigger part of our lives. When prices assume growth over a long period of time, even small doubts can cause big moves.
  2. The election added a new doubt. Some newly elected officials, especially in Texas, campaigned on pausing or limiting new data centers.3 Texas matters because it holds roughly a quarter of the country’s data center capacity,4 and many large technology companies are building there. Data centers are the large facilities that house the computers that power AI. The election results introduced additional uncertainty about potential restrictions on AI infrastructure development, adding to existing concerns about valuations and returns on investment.
  3. Here is the link to growth. Think of data centers as the “roads and bridges” of AI. Chipmakers, equipment suppliers, and utilities all earn money as those roads get built. If fewer data centers get built, or they get built more slowly, investors worry that computing capacity will be limited, which could slow how fast AI companies can grow. Federal Reserve research shows AI-related investment has also become a meaningful contributor to overall U.S. economic growth, so investors worried about a ripple effect.5

The result. On Thursday the S&P 500 fell 4.4%, its worst day since April 2025, and the Nasdaq fell 5.5%.6 Chip stocks fell the most, and the market’s “fear gauge” (the VIX) jumped about 70%.7

Keeping it in perspective

  • This is a correction focused on one segment of the market. Technology stocks led the declines, while broader equity markets also fell. The Nasdaq is down roughly 12% from a record high set about a month ago.8 Historically, corrections of 10% or more have occurred periodically during broader market cycles.
  • Even after Thursday's decline, the Nasdaq Composite remained up approximately 4.6% year-to-date (through November 5, 2026).9
  • A slower buildout is not a broken one. Economists at Oxford Economics note that slower construction “wouldn’t necessarily be a bad outcome for the macroeconomy,” and a Franklin Templeton strategist said the buildout may have been getting overheated. A slower pace could curb excessive spending and give companies more time to show real returns.10
  • The details are still unknown. Newly elected officials have not taken office, and campaign promises don’t always become law. Federal and state policy could end up looking quite different from today’s fears.
  • Panic selling tends to lock in losses. Investors who sell after a sharp drop risk missing potential market recoveries because market timing involves two decisions – when to sell, and when to buy back in. Making decisions during periods of heightened volatility can undermine a long-term investment plan.

What to do?

  1. Maintain a long-term perspective. If your investment strategy was developed around your specific financial goals and time horizon, short-term market volatility should generally be evaluated within that broader framework rather than prompting emotional reactions.
  2. Check your diversification. The recent run-up in AI stocks may have left some portfolios holding more technology exposure than intended. This is a good moment to check and discuss any adjustments in the context of your broader plan.
  3. Expect more volatility. Policy details, earnings reports, and economic data may continue to drive price movements in the weeks ahead. Market fluctuations are an inherent part of investing.
  4. Consult your OneDigital Investment Advisors financial advisor. If you’re feeling uneasy or your circumstances have changed, talk to your advisor. We would much rather have that conversation than have you react alone.

Sources

  1. NPR, “2026 election: Democrats win full control of Congress,” Nov. 3, 2026. https://www.npr.org/2026/11/03/g-s1-149526/2026-midterms-congress-balance-of-power
  2. The New York Times, “Why the Markets Don’t Care About the Midterms,” Oct. 30, 2026 (citing Ned Davis Research). https://www.nytimes.com/2026/10/30/business/midterms-stock-bond-markets.html
  3. CNN Business, “Nasdaq plunges into correction territory as midterm results raise fresh questions about AI boom,” Nov. 5, 2026. https://www.cnn.com/2026/11/05/investing/tech-heavy-nasdaq-plunges
  4. CNBC, “Democrats may go after data centers. That’s not a reason to dump all your AI stocks,” Nov. 4, 2026 (citing Wells Fargo). https://www.cnbc.com/2026/11/04/democratic-data-center-pushback-could-help-ai-stocks.html
  5. Federal Reserve Board, “The AI Buildout and the Economy: Publicly Available Data to Assess AI’s Impact,” FEDS Notes, July 17, 2026. https://www.federalreserve.gov/econres/notes/feds-notes/the-ai-buildout-and-the-economy-publicly-available-data-to-assess-ais-impact-20260717.html
  6. Associated Press, “A brutal sell-off for AI stocks sends Wall Street reeling, and the S&P 500 tumbles 4.4%,” Nov. 5, 2026. https://apnews.com/article/stocks-markets-ai-midterm-oil-trump-7ee9c212805aa5e70cf34d25aab7a36e
  7. CNBC, “Magnificent 7 loses $1 trillion. The most eye-popping stats from Thursday’s tech stock plunge,” Nov. 5, 2026. https://www.cnbc.com/2026/11/05/stock-market-selloff-ai-fears.html
  8. Charles Schwab, “Stocks Plunge on AI Fears, Volatility Erupts,” Nov. 5, 2026. https://www.schwab.com/learn/story/market-volatility
  9. BBC News, “Global tech stocks plunge as US midterms add to AI slowdown fears,” Nov. 5–6, 2026. https://www.bbc.com/news/articles/cmn04705rd8jo
  10. CBS News, “Midterm elections could zap the data center buildout, experts say,” Nov. 4, 2026. https://www.cbsnews.com/news/midterm-election-results-data-center-buildout-artificial-intelligence-texas/

Disclosures:

Investment advisory services are offered through OneDigital Investment Advisors LLC (“ODIA”), an SEC-registered investment adviser and wholly owned subsidiary of Digital Insurance LLC. OneDigital® is a registered trademark of Digital Insurance LLC and is the marketing name used by Digital Insurance LLC and its affiliates, including ODIA. Each entity has financial responsibility only for its own products and services. 

This material is for informational and educational purposes only and is not intended as personalized investment advice, a recommendation, or an offer or solicitation to buy or sell any security. Past performance does not guarantee future results. All investing involves risk, including the possible loss of principal. Market data reflects levels as of the close on November 5, 2026, and views are subject to change without notice based on market and other conditions. 

Indexes are unmanaged, do not incur management fees, costs, or expenses, and cannot be invested in directly. Past performance of an index is no guarantee of future results and does not reflect the performance of any ODIA investment strategy or client portfolio. The S&P 500® Index is an unmanaged, market-capitalization-weighted index of 500 leading companies in leading industries of the U.S. economy. The Nasdaq Composite® Index is a broad-based capitalization-weighted index of equities listed on the Nasdaq stock market. The CBOE Volatility Index® (VIX®) measures 30-day expected market volatility. 

Information obtained from third-party sources is believed to be reliable, but its accuracy and completeness cannot be guaranteed. ODIA has not independently verified third-party data. Economic and market forecasts set forth may not develop as predicted.

Publish Date:Nov 9, 2026Categories:Financial Planning, Wealth Management, Retirement Planning