The Quick Read
- Tech shares were dragged lower by renewed capital spending and debt concerns, while the broader market continued to make headway.
- International markets were roiled by government spending concerns as riots flared in multiple European countries, while emerging markets were hit by the AI pullback.
- The US elections will be in the rearview mirror for most of November and history shows that stock performance post midterm elections has been quite positive.
Scary AI Spending Spooks Investors
After a brief reprieve to end September, investor concern over the level of spending by AI companies roared back in October, pushing the tech-heavy Nasdaq lower for the month. Investors are growing concerned that the capital needed to finance the proposed spending may not be as easy to come by as previously thought. Additionally, restrictions on AI agents, consumer pushback against data centers, and potential regulation have all contributed to at least a pause in the runaway AI train. While some of the money went to fixed income instruments pushing 10-year Treasury yields back below 5%, investors haven’t pulled money out of stocks altogether. Instead, investors have rotated into other areas as seen in the chart below with the equal weight S&P outperforming the market weighted index. We believe this is a healthy development that will help the bull market continue in the coming months.
