In today’s edition:
— Two weeks before the U.S. midterms, investors are placing their sector chips
— Tesla’s flying car reveal highlights SpaceX potential
— COP31’s turtle mascot faces a weather threat: not enough boys
— Climate change heats up France’s student protests
— China, the U.S., India top the list of the world’s biggest GHG emitters
Two weeks out from the U.S. midterm elections, the potential for Democrats to flip Congress has started to show up in stock sector performances, with energy among the biggest players.
Big energy companies, led by oil and gas, enjoyed a strong third quarter as prices spiked by the Iran war only increased. Clean energy companies fared less well, hampered by President Donald Trump and rising borrowing rates, though demand for more energy from data centers is booming.
While nobody expects a reversal in anti-climate legislation and regulation in the second half of Trump’s term, a gridlocked Congress will at least be able to stall further attacks. Much will depend, however, on how high interest rates rise.
Other sectors suggest it might not be so bad. Rates and higher prices have already affected stocks in the utilities, industrials, real estate and consumer discretionary areas, meaning a slower economy is being priced in. Elsewhere, defense stocks were down 16% in the third quarter, on expectations for changes on Capitol Hill, while healthcare stocks were up 9%.
One wildcard will be whether a new Congress can pass the bipartisan permitting bill currently being discussed, which would benefit all energy companies, as well as AI companies, which have been lower lately but occupy a large segment of the positive side of the S&P 500 and Nasdaq.
History suggests that the market will rise after the midterms as the political pendulum swings back into a more neutral mode. A strong third-quarter earnings season in the next few weeks, combined with the removal of uncertainty in D.C. for the time being could favor that scenario and lead a strong run into the end of the year.
All of which means that the next few weeks are likely to dictate sentiment as we head into the holidays, and some investors are already laying their bets.
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