00:07:02 · Ed Elson
[00:07:02] S3: because it basically... I mean, obviously, it was a blowout win for for Democrats, but it also feels like a blowout win for democracy, which I think a lot of people were genuinely losing faith in. And it seems as though... I mean, what was so, I agree with you, disturbing about the depravity, the cruelty, the brazen corruption. I mean, the fact that our government was literally being run by mob bosses who are criminals. I mean, literal criminals, proven convicted felon of sexual assault, So we already knew that. Plus the corruption, that was very apparent, and I hope we'll now start to see some some justice taken. And, of course, he went... Then went and removed all of the agents at the agencies who tried to investigate him for his corruption. But it seemed the fact that we had voted this guy in twice was America saying that we endorse this, and this is... We're okay with this, and this is who we are. And the reality is that, you know, the elections were pretty close, and I think, honestly, the Democrats shut the bed, especially the previous election cycle because of what happened with Biden. And so we weren't getting a very pure signal, I don't think, in 2024 of who the nation really is. But this time, it feels like all of the facts were on the table. We all understood what was going on. And this was America saying, yeah. Actually, we're not cruel and depraved. Actually, we believe in decency. We actually believe in kindness. We believe that there is a way to be strong and kind and generous at the same time, which is what so many of these candidates have exemplified. Like, Talarico's speech at the end, maybe we should pull it up and have it handy, but it was all about love Mhmm. And generosity. And that was what he said about Paxton as well. I mean, he went on diary of a CEO, and he he he was asked about Paxton at the end. He said, I love I love this person because he's he's a child of God. I mean, that is there's a there's a level of strength and generosity that seems to be bubbling up in the party right now that really resonates with people. Like, this is actually for the most part, as we have tried to argue multiple times, for the most part, people are good. Agree. They're good, and they're kind, and they're generous. And this was America saying that's who we are.
00:09:25 · Scott Galloway, Ed Elson
[00:09:25] S0: I think that's really well said, but the... I've been watching, you know, closely watching politics and elections since I was, you know, for a while now. And this really is... This is not since Nixon was, you know, about to leave office has there been this type of route of the... I think there's 435 congressional districts. Not a single one flipped to Republicans. Not a single Democrat lost to a Republican yesterday in the entire House of Representatives. [00:09:59] S3: Just unbelievable. And by the way, victory lap because we predicted exactly this. My my June prediction was landslide. [00:10:07] S0: You predicted it. You were much more bold in looking at the numbers. I... As as someone who's... You know, I'm like a beaten dog that's just sort of scared to come out of the corner regardless of how nice everyone seems, And I was much more cautious. I'm like, I don't know. Anyways, I'm I'm very happy, and I've decided to wear these blue Democratic sunglasses or glasses which make me look like an aging porn producer in honor of the election. [00:10:33] S3: I'm not gonna I'm not gonna agree with you, but I'm not gonna disagree with you either. With that, shall we get into our intro and discuss next steps? Let's do it. [00:10:43] S0: Now is the time to fly. I hope you have plenty of the wherewithal.
00:10:51 · Ed Elson
[00:10:51] S3: Democrats swept both the house and senate in a historic victory last week. The day after the election, markets rallied with the Dow posting its best day since April 2025. Five big tech companies added roughly $1,000,000,000,000 in value, but by Thursday, that momentum reversed. The Dow dropped more than a thousand points, and the Nasdaq sank 5% hitting correction territory as tech stocks erased more than $1,000,000,000,000 within thirty minutes. The sharp swing suggest investors are still trying to make sense of what the election results could mean for the country with Democrats set to take control of Congress in January. The big question is what changes this shift in power could bring. Scott, we're gonna look at the potential impact, of the elections in this episode. We're gonna look at the impact on the economy, and then we'll look into the impact on the markets. And it appears that investors, they really don't know what to think. Clearly, a ton of anxiety, confusion, initially a lot of optimism coming up... Coming off of this. And then suddenly, the sentiment just completely reversed. I also think it says something about the amount of leverage in the system, the fact that the markets can whipsaw this quickly. But I think one of the central questions going into the end of the year and next year is what will the Democrats actually do? Because there are these huge massive decisions that Trump has made, specifically tariffs and Iran, and we could talk about Medicaid cuts and reductions to SNAP benefits, etcetera. But I think tariffs in Iran are the two big ones. And it seemed initially based on the market's response where the oil price of oil tanked, and by the way, continued to go down. It seems as though that is the market saying that the war is going to end soon. But I'm not sure if that's necessarily correct. So what do you think changes from here?
00:12:48 · Scott Galloway
[00:12:48] S0: It's very hard to find themes in a one day movement in the market. So if you look at the economic policies, one of the things that Prof Gives have been great at is branding themselves as the pro growth pro, like, economic growth party. I would argue that over the last ten years, the GOP has moved from being the pro business party to the pro billionaire party. And that if you actually look at the policies of massive deficits, not reinvesting in the middle class, that over the last 12 presidential administrations, what you've seen is lower growth in Republican administrations, lower job growth with greater deficits. That's just a fact. And that I would have liked to have thought that the market said that this was an endorsement of democratic policies as it relates to the economy. But I think probably what it was given the check back today was a bit of a relief rally that the markets don't like uncertainty. That once once the markets have sort of a feel for what the next few years will be like and the election is is over, the the markets like knowing who they're waking up next to, even if you don't agree with their politics or or or... They they just... They want a certain level of certainty. And once the election was over, there was a bit of, like, I I call it an uncertainty relief or certainty relief rally. Today, I think, with the wipeout we've seen in tech stocks, I wonder if people are interpreting this populist movement against data centers. I mean, the elections sent a resounding face plant or not so fast girlfriend to data centers and thinking, okay. Is the capital formation... If you have a wobbliness in big tech around it being out over its skis because of incredible... These incredible CapEx wars, and then you have a hostile... Potentially a hostile congress, what might that mean for the companies that are basically have become synonymous with the market to say represent so much of the market? I think it woke up and said, okay, great. Now what? Is this potentially at exactly the wrong moment when when the the the the sector itself, which is basically as goes AI, as goes on market right now, I would argue, are we about to see additional headwinds if the Democrats come in and start just getting... Passing all sorts of anti AI legislation, anti growth legislation? I don't think that's gonna happen.
00:15:13 · Scott Galloway, Ed Elson
I think that regulation is actually key to a market's growth. And one of the thing that's been constraining AI companies is a lack of guardrails and clarity around how they operate, what they can, what they can't do, and some certainty from citizens that these models are going through some sort of blue ribbon panel or check. The the piece of data I did see yesterday that just blew my mind, and I think I might have seen it from you or from your show, was Tom Lee, and it's all over the Internet now, showing that when the Senate in a midterm election flips to blue, and that's happened, I think, 20 times since World War two, every time over the next twelve months or six months maybe, the markets rip up. And it's it's a 100%. It's 20 for 20. So I don't... I'm I'm trying to digest why the market is seesawing back and forth. It is very hard to draw consistent themes, and CNBC, I'm sure, has already interpreted this 45 different ways. But I'm not... I I think it is difficult to draw any conclusions either way as I tried to do yesterday based on what we've seen in the last forty eight hours in the markets. What are your thoughts? [00:16:24] S3: It's very hard to understand exactly what investors are thinking. I mean, just to start off with the initial rally because what you had was a very, very big rally. The Dow especially up 3%, best day of the year. S and P up one and a half percent. NASDAQ up one and a half percent. [00:16:38] S0: Don't forget oil.
00:16:39 · Ed Elson
[00:16:39] S3: Oil, down 8%. And by the way, that that continued, to go down going into the week... Into the end of the week. So I think what is definitely clear is there is an assumption that we will have a swifter end to the war. Mhmm. And I think probably one of the big reasons that that investors think that is because JD Vance came out and said something that was pretty anti war. Plus, you've got control over Congress at this point, so that might put pressure on the president. To be clear, the president still has veto power. So they don't have enough seats in the Senate or the House to override his veto. So if they decide we wanna make these decisions, he can just say no. And he said as much. He's just gonna veto things that he doesn't like. So I think there is an open question now as to will the war come to a swifter conclusion. And right now, investors are betting yes. Is that the right bet? I don't think so personally, but that's a debate we can have. At the same time, I think they were probably projecting that tariffs will come to a a sooner close than perhaps we earlier thought as well because, of course, tariffs are attacks on The US economy. They're they're especially attacks on American consumers, but they are also attacks on corporations as well. Yes. Corporations can pass on the costs to consumers. That's exactly what they did, but not all of them. They they bore about 40% of the the costs, and they sent over the the remaining 60 to the consumers. They, of course, got their their 40% back in refunds, but still that is a level of uncertainty that investors don't like. I think that they were expecting something to be resolved there. I also think your point is important, is the psychology of having a result. Once you know what's happened, you feel better. You're down with any result so long as you have a result, and that's helpful. And then I think to your point about Tom Lee, we know from history that having some level of gridlock, which has now been introduced because he had Democrats with the house and the senate and and Trump, with the executive. He didn't have that before. He had repop... Total Republican control. Gridlock means it's harder to make crazy decisions in government and investors like that. So I think those were the dynamics that were going into the pop.