How are US stocks going after the midterm elections? Wolfe warns AI of a “wall of concern,” Damo says the pullback is nearing its end

The Zhitong Finance App learned that Wolfe Research released a report on Monday saying that traders expecting the US midterm elections to “run out of favor” in the stock market may be facing a “wall of concern” brought about by artificial intelligence (AI). This wall is preventing the market from rising further. On the same day, Mike Wilson, head of US stock strategy at Morgan Stanley, said that the stock market correction that began a few months ago is in its final stages, and investors should take advantage of the opportunity to allocate risk.

Wolfe's strategist team led by Chris Senyek wrote in the report that investors are now paying more attention to AI construction, and transactions surrounding this technology have become a “talk about performance” story, although the midterm elections may still be the biggest catalyst for US stocks this week. Senyek said AI trading “is now subject to technical transaction factors, including signs of washing when investors lock in full-year earnings.”

Last week, the Nasdaq 100 index fell about 2%, hampered by the disappointing results of Alphabet (GOOGL.US) and Amazon (AMZN.US). The index continued to decline on Monday. Senyek expects US stocks to remain volatile as traders evaluate the mixed performance of hyperscale cloud vendors. He said that Nvidia (NVDA.US)'s November 17 earnings report will be “critical” for AI transactions to “regain popularity.”

Senyek said the stock market “is still blocked by a well-known 'wall of worries',” adding that the latest hyperscale cloud vendor dynamics aren't entirely bad. He pointed out that Anthropic PBC released the S-1 file, the steady performance of Microsoft (MSFT.US), and the positive signals sent by Oracle (ORCL.US) Analyst Day, but these were all overshadowed by news from Alphabet and Amazon. Senyek said that mistakes at the execution level of hyperscale cloud vendors may continue to put pressure on them in the short term.

Senyek pointed out that whether US President Trump will increase pressure on Iran after the midterm elections, and the subsequent impact on oil prices, is “the biggest macro variable in the future.”

Data compiled by Morgan Stanley shows that since 1950, US stocks have been higher 6 and 12 months after every midterm election. Senyek expects that as long as oil prices remain stable and Nvidia's earnings report and Anthropic's upcoming IPO “prove to be positive catalysts,” the market will rise until the end of the year after the midterm elections. He also said that in the past 30 years, US stocks have been historically higher since November; this year depends on “how long the AI trading 'hangover' lasted last week.”

Wolfe Research is signaling caution as Wall Street strategists are trying to predict the direction of the US stock market after the midterm elections. Mike Wilson, head of US stock strategy at Morgan Stanley, said on Monday that the stock market pullback that began a few months ago is in its final stages, and investors should take advantage of the opportunity to allocate risk.