Goldman Sachs: Pre-election hedge unwinding drives market rebound, declining political uncertainty compresses market risk premium

BlockBeats news, November 4 - After the U.S. midterm election results were released, the Democratic Party regained control of both the Senate and the House of Representatives, but U.S. stocks quickly rebounded after a brief decline. Nasdaq 100 index futures fell 2.4% on election night before turning to gain 0.9%, rebounding about 929 points from the intraday low; S&P 500 futures rose about 1%, and Dow futures rose about 700 points.

Goldman Sachs and Deutsche Bank analysts believe that this rebound was mainly driven by the unwinding of concentrated hedge positions established before the election after the results became clear, while the decline in political uncertainty also compressed the market risk premium. Goldman Sachs believes that the AI infrastructure sector's valuation had already contracted significantly, and a short-term decline in volatility could further support the stock market.

However, market concerns about AI investment have not disappeared. Gina Hinojosa, the governor-elect of Texas, said that the freeze on data center construction permits will not be lifted until a more comprehensive regulatory framework is introduced, which may cause several gigawatts of computing capacity originally scheduled to come online in 2027 to be delayed until 2028.

Deutsche Bank regards the U.S. debt ceiling issue that may be triggered in the second quarter of next year as an important policy risk. Whether Republicans can complete the debt ceiling adjustment before the new Congress takes office in January next year will affect subsequent fiscal policy uncertainty. Analysts believe that this rebound mainly reflects position adjustments and risk premium compression, while data center construction permits, AI infrastructure investment, and debt ceiling negotiations are the key tests the market will need to face next.