Fear spikes post-midterms, stocks slide... Almost everything was down today... The selling might be overdone – for now... What to own and what to watch next... Dave Lashmet just picked one of today's winners...
Like we said, there's no ignoring the AI sell-off...
We've been watching the AI trade weaken over the past few weeks, and today was the deepest dive yet. Shares connected to the chip industry and data centers opened lower, and the losses accelerated throughout the morning – sparing few companies along the way.
Today, the CBOE Volatility Index ("VIX") – considered by some to be the market's "fear gauge" – rose 70% from yesterday...
Stocks like Nvidia (NVDA), Coherent (COHR), Micron Technology (MU), and Sandisk (SNDK) finished down 9%... 13%... 17%... 22%... And the PHLX Semiconductor Index ("SOX") was off about 12%.
Wednesday's post-election rally was gone by lunch, and then the selling became market-wide, which is different from what we've seen lately. Sectors like consumer staples, energy, and healthcare – which were higher in the morning – ended up down today.
Overall, the Dow Jones Industrial Average lost 3.5% and had its worst second trading day after a midterm election in records going back to 1896.
Only about 70 of the S&P 500 Index stocks were higher as the U.S. benchmark index lost 4.3%, and fewer than 10% of the small-cap Russell 2000 Index saw gains. The tech-heavy Nasdaq Composite Index dropped 5.5%.
It all comes on the heels of Tuesday night's "blue wave" midterm results.
They have folks worried the AI infrastructure build-out could grind to a halt once a new Democratic Congress is seated in January, and that such a slowdown could threaten the payoff of the entire AI boom.
A dot-com-style crash, in condensed form...
Today, we heard more echoes of the dot-com bust, with "rotation" out of the biggest winners of the AI boom while some other sectors held up much better. But nothing was really spared.
The action is eerily reminiscent of the dot-com bust 25 years ago, only squeezed into a single trading day.
On Monday, we wrote to you how the popular tech stocks of the 1990s were hurt the most in the early stages of the bust in 2000, while other sectors held up well initially before getting caught up from 2001 to 2003.
Today started more like another AI-exclusive sell-off, but it didn't end like one. Rather, around midday, it began turning into an "everything is down" day like we see during fully bearish times in the market – and what happened at the end of the dot-com bust.
So, if nothing else, what we've seen over the past week or so in the markets constitutes a form of an AI crash.
The question now is how much it will keep going...
Given the intense selling and the "fear" we saw in the market today, I (Corey McLaughlin) wouldn't be surprised to see a short-term low here.
The Nasdaq Composite Index today dipped into "correction" territory – down more than 10% from its record close on October 6.
That doesn't mean stocks can't go lower, just that sentiment surely has soured to an extreme negative. CNN's Fear & Greed Index, which is good for showing present market mood, fell into "extreme fear" territory today.
And as DailyWealth Trader editor Chris Igou wrote yesterday, tech stocks have dropped toward "oversold" levels. Similar declines have marked near-term bottoms seven times in the past four years during the AI-driven bull market...
The relative strength index ("RSI") measures the speed and scale of price changes. It's also useful for identifying extremes in "fear" or "greed"...
As Chris wrote...
The Nasdaq 100 bounced back from similar RSI levels in October 2023, April and August 2024, April 2025, and April and July 2026. Even if we see a further dip from here, the longer-term tech uptrend would still be intact.
We'll be watching what happens next closely, though...
Today, the Nasdaq-100 dropped under its 200-day moving average (200-DMA) for the first time since April. The 200-DMA is a long-term technical trend, and technical traders often see it as a level of "support." Falling past that level is a concerning sign... but also not a surefire signal of more pain to come.
This spring, tech stocks rallied back from below their 200-DMA. They did the same in the spring of 2025 in the wake of "Liberation Day" sell-offs.
In these cases, the rebounds followed the promise of an Iran ceasefire and the White House pulling back from exceedingly high tariff rates, respectively. Following that trend, it's hard to see right now what a catalyst for a turnaround could be this time.
A resolution to the war in Iran could fit the bill (regarding energy costs and inflation), but that has less to do with concerns about slowing data-center development.
How to pass this test...
In any case, we're not surprised to see a sell-off in just about everything touching AI after years of a blistering bull run. But thus far, when we've seen corrections during this stretch, the market has rebounded.
This marks another test – the "AI bull market's toughest test," for that matter, as we called it in our October 15 edition amid warning signs of this weakness. At the same time, folks like our colleague Whitney Tilson have been warning all year about an AI "bubble."
So, we want to repeat what we wrote on Monday about the risks in a heavily AI-concentrated market – risks we've written about for years, frankly, and that are becoming widely apparent today...
If most of your investments sit in an S&P 500 index fund, just know that about 40% of it rides on the 10 largest companies – mostly the AI names now under fire. Even if this current moment marks a short-term low for these stocks, there could be more pain ahead down the road.
You may want to consider spreading some of that money out, whether through an equal-weight fund or into the kinds of sectors that held up during the first part of the dot-com-bust rotation – like healthcare, energy, and consumer staples.
Even after today's drops, healthcare and energy are up roughly 13% and 8%, respectively, over the past three months, making them the best-performing major sectors of the S&P 500. Consumer staples are up more than 7%.
Meanwhile, tech stocks are down 12%, and communication-services stocks – which were also among the biggest losers of the dot-com bust – are down more than 5%. The rhyming with the dot-com days is too much to ignore.
But like I said, the pessimism on the AI trade may be getting a touch overdone in the short term. Over multiple years, a larger crash could still play out. But if the selling cools in the days ahead, it could be setting up for a near-term bounce.
That's not just a hunch. It's an observation backed by market history...
This has – more or less – happened before...
Political cycles tend to move markets in the short term on knee-jerk reactions to who controls Congress or the White House. Still, some patterns are predictable...
One is uncertainty and volatility in midterm years, followed by much stronger times in Year 3 of the presidential cycle (which we're just about to enter).
We shared some of that history yesterday. Here's more...
Our colleague Brett Eversole wrote about this pattern in a recent issue of his True Wealth Systems "Review of Market Extremes" update...
Stock returns have formed a historical pattern based on the specific year of a president's term.
The first year tends to be good. The second year is terrible. The third year is great. And the fourth year is good again. The differences are even more pronounced if you track years ending on September 30 instead of a typical calendar year.
Here are the returns of each year in the election cycle since 1928, using that method...
He continued...
In Year 1, the election has just ended. The market has certainty about who's in charge, so prices tend to rise.
Year 2 brings uncertainty back with the midterm elections. Historically, that's the toughest part of the cycle.
Then, Year 3 comes along. The president starts gearing up for the next election... which means pushing policies that focus on the economy. This change in posture leads to the biggest gains for investors.
Jeff Hirsch, editor of the Stock Trader's Almanac and former guest on the Stansberry Investor Hour, has tracked this cycle for decades. He calls the stretch from the fourth quarter of a midterm year through the second quarter of the following year the "sweet spot."
According to the Almanac, the S&P 500 has averaged a roughly 20% gain over those three quarters, and the Nasdaq has risen almost 30% on average. Weakness tends to come before that window opens. Down days like today have ended up being part of the pattern.
What to watch for next...
Our colleague Greg Diamond, editor of Ten Stock Trader, has studied the same setup going back further – all 32 midterm elections since 1902. Again and again, he has found choppy trading heading into the vote, followed by a rally once the results are in.
As for what could decide whether that rally shows up this time, Greg pointed subscribers to one key tell today: the market's reaction to Nvidia's earnings in about two weeks.
That makes a lot of sense to me.
A lot of the trouble began when the "hyperscaler" tech giants began reporting negative free cash flow. Nvidia's results – and CEO Jensen Huang's outlook – could go a long way toward soothing the market... or not.
Greg is a former Wall Street trader who once made $4.6 million in a single day. He uses recurring market cycles like these to find what he calls "Doubling Windows" – short stretches when a stock or fund is set up for an outsized move. His track record includes 28 trades with gains of 100% or more in 18 days or less, including 197% on Tesla (TSLA).
He believes the post-midterm setup has opened another one of these windows – one that could let readers double their money in as little as 18 days. He also warns that this could be one of the last big runs before a major correction in 2027.
Finally, the stock we told you about yesterday gained $10 billion in market cap today. Had you bought it?...
Yesterday, we told you that Stansberry Venture Technology editor Dave Lashmet has been following a stock that's more or less insulated from Washington. It involves a superhero, a soundtrack, and a camera.
He just recommended it to Venture Technology subscribers last week. And we said the next catalyst for the stock was coming this morning...
It did. Overnight, the company reported quarterly results that beat expectations and raised its full-year profit outlook. With almost everything else down today, this company's shares climbed 6%, adding roughly $10 billion in market value.
Better yet, management confirmed the thesis Dave laid out, almost point for point.
The record-setting superhero film we mentioned yesterday has now topped $2.5 billion at the global box office, the company said, and it's the highest-grossing movie ever in North America. After the film hit theaters, unit sales of related video games roughly doubled.
Songs from the company's own music label that are featured in the movie have racked up more than 1 billion streams. And a new superhero game from the same company – built on the same playbook – sold more than 2.4 million copies at $70 each.
The film business alone added more than $880 million in sales and nearly $490 million in operating profit compared with the same quarter a year ago.
That's what Dave means when he calls this company a "digital-content behemoth." One hit doesn't just sell tickets. It sells games... songs... and video streams... and keeps selling them for years. None of this changes based on which party controls Congress... or whether AI giants can keep building data centers.
Even after today's jump, Dave still sees the shares roughly doubling from here.
Last summer, we closed Dave's elite research service to the general public. The only way to access it has been through a $34,000 Stansberry Alliance membership.
But as we mentioned yesterday, because of the timeliness of this recommendation, we've reopened Venture Technology to the public at a special discount – but only until tomorrow. Click here to get Dave's pick, buy-up-to price, and full thesis before the doors close again.
New 52-week highs (as of 11/4/26): Arch Capital (ACGL), Arthur J. Gallagher (AJG), Amgen (AMGN), Abercrombie & Fitch (ANF), Air Products and Chemicals (APD), American Water Works (AWK), Alpha Architect 1-3 Month Box Fund (BOXX), Berkshire Hathaway (BRK-B), Cintas (CTAS), Quest Diagnostics (DGX), Disney (DIS), Exelixis (EXEL), Gilead Sciences (GILD), W.W. Grainger (GWW), Hagerty (HGTY), H&R Block (HRB), iShares Biotechnology Fund (IBB), Eli Lilly (LLY), Lonza (LZAGY), VanEck Morningstar Wide Moat Fund (MOAT), Microsoft (MSFT), Motorola Solutions (MSI), Nasdaq (NDAQ), Invesco High Yield Equity Dividend Achievers Fund (PEY), Pfizer (PFE), Procter & Gamble (PG), Packaging Corporation of America (PKG), Philip Morris International (PM), Public Storage (PSA), Starbucks (SBUX), SharkNinja (SN), State Street SPDR Portfolio S&P 500 Value Fund (SPYV), Translational Development Acquisition (TDAC), Travelers (TRV), Tradeweb Markets (TW), Visa (V), Veralto (VLTO), VeriSign (VRSN), State Street Consumer Staples Select Sector SPDR Fund (XLP), State Street Health Care Select Sector SPDR Fund (XLV), and Block (XYZ).
In today's mailbag, feedback on yesterday's Digest about the midterm results... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"How did you decide that Iran and AI decided the elections? That's what the Democrats say. That is not necessarily what caused the rout, we are so easily fooled by rhetoric. I predict in a few months the real truth will come out, and we will see how easily we are fooled." – Subscriber JoAnne R.
Corey McLaughlin comment: We appreciate the healthy skepticism. Rhetoric is often simply passed on as analysis these days. But our Iran read wasn't just a Democratic post-election talking point.
Vice President JD Vance blamed the war for the losses, and President Trump acknowledged that the war – and the higher gas prices it caused – played a role. I agree. Having the highest gas prices ever on a midterm Election Day was no coincidence.
I believe that many voters have found common ground in their frustration over higher prices for gas and just about everything. Yes, other things matter, but the economy was a difference-maker in the midterms, as it often is in any election.
As for AI, no spin is needed. Voters in town after town turned down data centers on the ballots. Many who voted them down don't want to pay for them, don't want to hear or see them in their backyards, and don't trust the promised payoffs for their communities.
But we're curious about your take. If not these two factors, what did cause the rout? Let us know: feedback@stansberryresearch.com.
All the best,
Corey McLaughlin
Baltimore, Maryland
November 5, 2026
