Weekly house view | Midterms: Blue wave coming?
The week in review
The S&P 5001 fell for a third week running, down 0.6%, with markets jittery ahead of US midterm elections that they expect to deliver a “blue wave” of Democrat victories.
Elections in both Brazil and Israel offered cautionary tales, however, with both delivering surprise results in favour of the incumbents.
Ahead of the midterms, the Federal Reserve left interest rates on hold, as did the European Central Bank. The Bank of Japan also held rates and said underlying inflation had reached its 2% goal. At the ECB, President Christine Lagarde said she would step down nine months early, in February.
In the UK, the government raised bank taxes from 3% to 6% for 15 months in a budget of tweaks rather than major substance. We expect the Bank of England to raise rates to 4% this week.
At its meeting, the Fed acknowledged that higher rates and tighter financing conditions are starting to impact economic activity. The Fed also agreed to keep eight meetings next year but to dedicate one meeting to non-rate decisions, and two to the same purpose in 2028. Fed Chair Kevin Warsh said rates still matter in the era of artificial intelligence (AI) and the surge in investment around it: “I don't believe that they're somehow divorced from the rest of the economy.”
Among AI players, circularity continues: Meta presented a capital-raising plan of up to USD 95 bn. Nvidia, AMD and Broadcom expressed interest in participating.
Quote of the week
ECB President Christine Lagarde said she would be leaving her post early “because I want to have the freedom of speech, the freedom of expression and the freedom to engage on matters that are not monetary policy matters.” She has reportedly been in talks to chair the World Economic Forum.
Key data
US gross domestic product (GDP) grew at an annualised rate of 3.4% in the third quarter, with core GDP excluding inventory accumulation and net trade up 5%, reflecting a robust economy whose strength is broadening.
Profits at China's major industrial firms rose 14.4% year-on-year in September 2026, accelerating sharply from 4.2% in August.
