The US Midterms: Reshaping the Stock Market

Summary

• The discussion took place on November 5, 2026, on the Goldman Sachs trading floor between Chris Hussey & Lou Miller.
• Beta-adjusted net exposure in the prime book is at very low levels versus history as active investors adopt a defensive stance.
• AI data center stocks are down 36% from their highs earlier in the year.
• Higher beta areas within the data center trade include memory down 42%, optical networking down 46%, & NeoCloud down 57%.
• Multiples for the data center trade are approximately half of what they were in June, reaching liberation day lows.
• Healthcare is identified as the next leg of the AI trade, with companies increasingly involved at the tools & diagnostics level.
• Healthcare is described as a defensive sector that is historically uncorrelated to AI & expected to see accelerating growth next year.
• Traditional staples are considered expensive defensives, with earnings yields half of high yield bond yields & dividend yields half of the 10-year treasury yield.
• The recommended trade is the S&P 500 excluding AI, focusing on quality compounders with high-quality balance sheets.
• Key factors to watch include employment, inflation, geopolitical events, the remainder of earnings season, equity capital markets, debt capital markets, & the FOMC decision on December 9th.
• A relaxed Santa Rally is anticipated for the end of the year.