MARKET PERSPECTIVE
By J Mulraj
Oct 31- Nov 6, 2026
And I doubt you can fix it, not after the Mid Terms
Image created using ChatGPT
Jamaican singer Harry Belafonte sang a popular song, ‘There’s a hole in the bucket’ in which he, wanting to laze, uses excuses not to fix it.
It sounds eerily similar to the propensity of American Presidents to kick the debt, caused by perennial holes in the US Budget, down the road. They, too, are lazy to address an intractable problem of high debt.
Wars are expensive not only in the number of lives lost and property damaged, but also in the cost of insanely advanced weapons of destruction. President Trump has had two Presidential terms. In his first term, the cost of wars fought (whether initiated by him or not) in Afghanistan, Iraq and Syria are estimated to have cost some $ 175 b. In his current term, the cost of the Iran war, initiated by him with Iran, has cost, so far, $ 47b.
And the cost of war has to be budgeted.
But there’s a hole in the budget, dear Donald, dear Donald,
There’s a hole in the budget!
And Scott Besant can’t fix it!
You can, Donald! By stopping wasteful, never ending wars!
That was the message sent by the American voters in the just concluded Mid Term Elections this week. The Republican Party lost in both houses, the US House of Representatives and in the Senate. Trump is still the President, up until January 20, 2029.
And, as per the 22nd Amendment, he will be ineligible to run for a third term!
Hallelujah!!
The US Mid Term Election results immediately resulted in a drop in indices, in prices of AI shares and of shares of Elon Musk (a big backer of Trump) companies. NASDAQ dropped 5.5%, S & P 500 4.3% and DJIA 3.4%. Stock prices of Tesla dropped over 10%, and of SpaceX over 9% in a day. Nvidia’s stock fell 9%, losing over $ 400 b. in market capitalisation, AMD and Micron lost over 17%.
This has dangerous implications for US stock markets. US markets are near all time highs because of the capex spend on AI and the optimism over the AI future. Democratic control over both, the House of Representatives and the Senate, could lead to efforts to curb the enthusiasm and to restrain AI spending. The current AI boom resembles the optimism over Internet in the dotcom boom. After the dotcom bubble burst in March 2000, the Nasdaq Composite fell 78% from it’s peak of 5048.
So, after the Mid Term election results, the main risk from the Dems is a stricter attitude towards AI, on fears about the awesome powers a rogue AI without guardrails may become misused, and the resulting slowdown in growth of the industry. And, from the Republican side, the biggest risk is if a miffed President Trump escalates the war on Iran to a dangerous level.
The results of the mid term elections brought down the price of Brent crude, which were hovering in the $ 102-104/barrel range to $ 94/b before recovering to $ 98-100 range. The initial assessment of a more pacific Trump, which brought oil prices sharply down, seems to have evaporated.
Less likely to evaporate, though, is Trump’s bloodlust for war. So it seems that Scott Besant will continue chanting ‘there’s a hole in the Budget’ which Trump will ignore. The likely deceleration of AI development would delay the productivity gains that would help patch the hole.
Last week the BSE Sensex closed at 81028 for a weekly gain of 6569 points.
Any escalation of the US Iran war would push up oil prices, fuel inflation, and force Besant to raise US interest rates.
Looking at the incurable hole in the Budget, the unending wars and the high oil prices fuelling inflation, investors may do well to switch to another of Harry Belafonte’s song, and ‘Jump in the Line’ to sell.
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Comments can be emailed to: jmulraj@asiaconverge.com
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