The Blue Wave and the economy
SPY•The Nasdaq rose more than 2% and the S&P 500 gained about 1.5% as technology stocks led sector gains. Franklin Templeton’s Sonal Desai said the election’s potential drag on AI investment would be limited, while fiscal dealmaking could widen the deficit and inflationary pressures could lead the Fed to raise rates two to three times, starting most likely in December.
1. Markets advance
The Nasdaq rallied more than 2%, the S&P 500 rose about 1.5% and the Dow edged higher. Technology gained more than 3%, leading S&P 500 sectors, while healthcare was the weakest group. The dollar advanced about 0.7%, bitcoin gained about 1%, U.S. crude rose more than 1% and gold fell about 1%; the U.S. bond market was closed for Veterans Day.
2. Desai assesses outlook
Sonal Desai, portfolio manager and chief investment officer at Franklin Templeton Fixed Income, said potential state restrictions on data centers could raise build-out costs but were not insurmountable, with a moderate effect on economic activity. She said AI capital expenditure contributed 1.4 percentage points to third-quarter GDP growth of 2.1%, but subtracting items such as imported hardware would at least halve that contribution.
3. Fiscal and rate outlook
Desai called the prospect of a divided government narrowing the fiscal deficit “wishful thinking,” saying both parties wanted to spend more. She said dealmaking could widen the deficit and that resilient growth, a strong labor market and entrenched inflationary pressures could put the Fed on track for two to three more rate hikes, most likely beginning in December.
