Midterms, and how far tech had fallen

Easy version of DK's November 3 note on BofA, ING, Goldman Sachs, and Deutsche Bank. The note was written before the election. This is not investment advice. Only summary numbers are used.

In one line, three firms thought a split government was likely either way, and that the election would not change the U.S. growth path. They said to watch Iran policy and data center permits after the vote.

The summary said polls had Democrats ahead by about 8 percentage points, with the House likely to flip and the Senate close. That was a pre-election poll, not a result. BofA saw little difference in growth across scenarios, and a deficit near 6% of GDP. GDP is the value newly produced in a country over a period. A deficit is government spending above taxes. ING said a blocked Congress could make the president's own Iran and tariff tools larger. A tariff is a tax on goods crossing a border. BofA had revised its view to two Fed rate hikes, in December and next March. The Fed is the U.S. central bank.

On AI spending, the summary said state and local data center permits mattered more than federal rules. A data center is a large building of computers that runs AI calculations. BofA saw permits as a cost increase, not a broken investment cycle.

After technology stocks fell ▼ 11% in three weeks, Deutsche Bank moved back to overweight from neutral. It said relative performance versus the rest of the S&P 500 had reached the floor of a trend channel more than 10 years old, a spot that produced five V-shaped bounces in two and a half years. Positioning was a neutral 40th percentile, and assumed profit growth near 10%, versus actual third-quarter growth of about 47%. Past similar spots saw technology rise 32% on average and the S&P 500 rise 16% over three months. That is a past average, not a promise for this time. The firm kept an S&P 500 year-end target of 8,000. A target is a written number, not a promise. The floor had broken in large shocks, so Iran escalation after the election was the main risk.

Three lines to keep. Before the vote, the reports cared more about Iran, tariffs, and permits than about the growth path. The technology-floor claim was Deutsche Bank's view. 8,000 was a target, not a fact.

Left out: scenario tables in the long reports. Poll numbers are pre-election. Past average bounces were not turned into a forecast.