Going through the mid-term results, I came across a new word - dummymandering. Basically it refers to attempts at gerrymandering, as the Republicans tried in Texas, backfiring and turning safe seats unsafe. Texas, the most Republican of Republican states has in essence turned mainly Blue.
Winning Governorship in Texas is a big deal, and a big surprise. Up until election day, it was not considered a likely outcome.
Gina Hinojosa ran on a cost of living campaign, and in particular was keen on restricting expansion of data centres. If we look at flips in governorships, they are in states where the a large amount of expansion is planned, with Texas by far the largest.
Generally speaking, mid-terms are a non-event. The party in power loses seats, and the legislative agenda slows. But the flip in Texas is a huge deal. Before the mid-terms, I would have said the change of a data centre build out slowing was relatively low, as all the main players were engaging in a capital war. But now, with the mid-terms, the chances of regulation slowing the data centre build out has increased.
Now seeing the Texas results, I can understand why investors dumped semiconductors AND sold gold, and bought treasuries. The possibility of a cyclical slowdown has increased, and possible something like a dot-com bust.
For me, the mid-terms and the win for Lula in Brazil shows that voters have tired of culture wars, and want more money. This is pro-labour trade I have been seeing for the last few years. But I can understand the weakness in this pro labour trade last month now. But on top of regulating data centres, Democrats also pushed for restoring Obamacare, increased government spending and lower taxes for households.
I cannot work out if this is truly bearish for markets. The big players in the market have been whipsawed as they announce big spending plans. Do markets then reward them for scaling it back? Seems that way today. Or do they look for work arounds? And if hyperscalers do not build data centres in the US, do they build them overseas? Or do funding markets and IPO markets close to all things AI, and we have a dot com bust? I think Japan is the best place to look. It has pro-labour politics AND big exposure to AI. If JGB yields tank - then what I thought was pro-labour, was in fact the AI trade.
I am always reluctant to trade around big political surprises. Market action has a way of bringing changes. Do Democrats comes out, and say they just want to regulate data centres and not slow them? Who knows. But at least I know what markets are looking at now.
