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By Bas van Geffen, Senior Macro Strategist at Rabobank

Associated Press is calling the Congressional race in favour of the Democrats. The party wins both the House of Republicans and control of the Senate, changing the balance of power when the new Congress convenes at the start of 2027. However, President Trump still has the powers of veto and executive order, creating a divided government in the US.

The blue wave that swept through Congress will affect the policies that are proposed from next year, but Trump will probably veto any bill that he does not like. “I have the ultimate power – it’s called veto,” he said in an interview before voting closed, adding that “if we didn’t win, I veto everything. I’ll be vetoing, vetoing”. And, despite the Democrats’ big win, they will not have the required two-thirds majority in both chambers to overturn a veto. So, their policy proposals may not get far. 

Trump added that his veto powers will eventually force the Democrats to make deals with him. But it may not be so easy to make concessions. Both parties share little common ground, so our US strategist believes that a legislative gridlock is the more likely result. 

That’s particularly problematic for fiscal policy. Gridlock should limit additional spending or tax cuts, but the divided government also reduces the odds of a serious effort to shore up public finances. As a result, the term premium will probably remain a force keeping US long-term rates pinned at higher levels.

A first government shutdown approaches on December 11, and the debt limit may lead to more political brinkmanship in 2027. Aside from the uncertainty that this creates, the US economy should not expect any meaningful fiscal impulse. So, these results could weigh on US equities. 

Meanwhile, President Trump may also test how far his other “tremendous power” reaches. Given an unsupportive Congress, the president will probably try to implement his policy agenda through executive orders. That particularly allows him to continue course on foreign policy, trade policy, and immigration.

That includes the decision on the way forward in the Middle East. The decision to attack Iran again, or not to, lies with the Commander in Chief. President Trump is showing restraint for now. He told the Financial Times that “We’re locked and loaded if we need to [strike Iran again], but there may be no reason for it.” 

Oil futures fell sharply earlier in the week, after Trump indicated he wants to give diplomacy another chance, and front-dated futures have stayed lower since then. However, the recent rise in 2027 pricing suggests that markets may be shifting expectations to a scenario of tight supply and elevated transport costs into next year. To reiterate, we remain sceptical that there is enough common ground for a deal between the White House and Tehran, and believe that escalation in the coming weeks is likelier than not.

And, finally, by winning the Senate, Democrats can now also effectively block Trump’s appointments. That includes potential replacements for Fed Governors Cook, if she is forced out, and Powell, if he decides to resign from the central bank’s board. 

Following the mixed (but strong) Manufacturing survey data for October (ISM up, S&P down), the Services sector survey data this morning more unequivocal.

• S&P Global US Services disappointed, falling from 58.8 to 56.1 (and worsening from the flash print of 57.9)
• ISM US Services also disappointed, falling from 54.9 to 54.5 (below 54.8 exp)

The US Composite PMI remained comfortably above the critical 50.0 no-change mark in October to signal another month of private sector output growth - and remains the strongest globally. However, amid weaker gains in both manufacturing production and service sector activity, the index fell to 55.9, from 58.4 in September – the lowest in three months...

“The October PMI surveys mark a strong start to the fourth quarter for the US economy, indicative of GDP rising at an annualised rate of over 4%," according to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence 

The star of the upturn remains the tech sector, but encouragingly solid supporting performances are also being seen in consumer-facing sectors and financial services

However, Williamson warns "the good news on growth is tainted by yet another worrying intensification of inflationary pressures and some disappointing forward-looking indicators from the survey."

Although current output growth remains strong, the pace of expansion has slowed from recent highs, linked to slower gains in order book inflows and reduced confidence about the economic outlook. 

“Business optimism fell sharply across the vast services sector in October, reflecting worries relating to affordability, interest rates, and the uncertain political environment."

Under the hood, New Orders tumbled, employment bounced back into expansion, but prices paid remain elevated...

Average prices charged for services meanwhile rose at one of the fastest rates seen over the past four years. Combined with a jump in goods prices tracked by the October manufacturing PMI survey, the overall signal is for inflation to rise further above the Fed’s target in the coming months, and that is reflected in rising rate-hike odds for December...

Will Warsh be hiking into a data-center-deadening recession?

Authored by Jonathan Turley via Jonathan Turley,

The political violence on campuses continued this week, with students at the University of Michigan and the University of Utah charged with criminal assaults on conservatives. For years, some of us have written about the increasingly radical environment in higher education where faculty have gradually eliminated conservatives and libertarians from departments.

At the University of Utah, Amber Grace was charged with misdemeanor assault and property damage. The College Fix reports that Grace allegedly assaulted a member of the College Republicans at the University of Utah. A video shows the transgender student threatening Republican students over a whiteboard poll that asked if there are only two genders.

During the confrontation, the Republican students ask, "Do you believe we should have the right to freedom of speech?"

Amber Grace responds, "No, I think Republicans should be shot in the streets, personally."

Transgender man says: "I think Republicans should be shot in the street" moments prior to brutally assaulting a College Republican student. 

Republican students aren't safe around unstable men pretending they're woman. 

Follow @UtahCollegeReps pic.twitter.com/ivu9G2igfE

— Rylie (@Rylieparis05) October 28, 2026

That is followed by Grace tackling the Republican student and the College Republicans also posted a photo of the aftermath of the attack, showing the assaulted member with a ripped shirt.

College Republican attacked while peacefully tabling at the University of Utah.

Transgender man rips shirt off conservative student for affirming there are only 2 genders.

Why does this keep happening on college campuses? pic.twitter.com/MKrlednw0m

— Utah College Republicans (@UtahCollegeReps) October 27, 2026

Grace is facing two Class B misdemeanor citations - for simple assault and property damage.

At the University of Michigan, Temulun Togochog was shown on video attacking a pro-Israel speaker. After yelling at the woman, Togochog allegedly smacked Joe Redden with her phone, then attacked Jewish conservative activist Liz Benichou, pushing her to the ground.

Togochog then resisted arrest and hit officers. While being handcuffed and led away, she is heard yelling, "I should have f***ing killed you when I had the f***ing chance."

She is now charged with one count of assaulting an officer and two counts of assault and battery under a pending felony warrant.

These cases are only the latest in a long line of incidents of political violence, largely from the left on our campus. This is the product of a radicalized environment, including faculty who are part of what I have called the "radical chic."

Radical faculty members on the left are common across the country, and many espouse the same hate-filled and violent rhetoric.

Professors have regularly advocated "detonating white people," denouncing police, calling for Republicans to suffer, strangling police officers, celebrating the death of conservatives, calling for the killing of Trump supporters, supporting the murder of conservative protesters, and making other outrageous statements. A San Diego University professor celebrated the death of an Israeli soldier who was eaten by a shark.

Such rhetoric creates a sense of license in those inclined toward violence, particularly those who are mentally unstable.

Obviously, these students should be suspended. However, there is a deeper issue in the environment in higher education that has fostered such political violence.

While the Iranians are celebrating with smug satisfaction the Democrats' historic midterm blue tsunami in the US midterm elections, Russia's leadership is reacting very differently.

Deputy Foreign Minister Sergey Ryabkov on Wednesday bluntly stated that that leaders in the US Democratic Party have a "sharply negative" approach to relations with Moscow.

"We will continue our work in accordance with the directives of the President of the Russian Federation," he added, coming at a sensitive moment where the Kremlin has been welcoming President Trump's latest decisions on Ukraine, which have piled the pressure on Zelensky to make compromise.

Not only has Trump of late repeatedly suggested that Zelensky must go, calling for elections in Ukraine, but he has refused to sign into effect the "Lindsey O. Graham" sanctions, while lifting the sanctions on Russian diesel. These decisions have by and large outraged Democrats.

Ryabkov stated further that Russia's position on Ukraine and broader foreign policy "is not based on short-term considerations and, naturally, does not depend on the fluctuations of the political barometer in other countries."

"The Democratic Party leadership's approach to relations with Russia is sharply negative. There is nothing new about that." --Sergey Ryabkov

President Putin himself has repeatedly emphasized that Moscow will see its 'special military operation' through to the end, with or without a peace settlement.

Still, the Kremlin is fully aware that the Democrats taking back the Senate and gaining a firm majority in the House could make Trump's more positive and open approach to Russian relations all the more difficult.

Putin spokesman Dmitry Peskov has expressed hope that Trump will continue his "peacemaking efforts" after the midterm elections.

"President Trump continues to exercise his powers. We sincerely hope that he will also continue his peacemaking efforts," he said in the Wednesday remarks.

While "panic" is much too strong a word, it's clear that Kremlin officials are concerned about what the future of relations with Washington will hold...

China, however, has reacted with a more muted statement and with some cautious optimism. Foreign Ministry spokesperson Mao Ning said Beijing plans to continue "constructive strategic relationship" with Washington, describing China's view that US elections are a “domestic affair”.

"China is willing to work with the US to safeguard and implement the important consensus reached by the two heads of state, strengthen communication, properly manage differences and expand cooperation, build a constructive strategic relationship based on respect and equality," Mao told a press briefing in Beijing.

ADP's Employment Report showed a better than expected rise in jobs in October, up 86k (vs +67k exp) - the 16th monthly rise in employment in a row...

"Employers of all sizes were hiring last month," said Dr. Nela Richardson Chief Economist, ADP.

The Services Industry saw job gains accelerate while Manufacturing slowed with the advance reflecting gains in trade, transportation and utilities, education and health services, leisure and hospitality, financial activities and construction.

Richardson also noted that ADP data suggests that "job-changers were lured by a combination of bonuses, overtime, and more hours in addition to higher base pay."

Taken together, earnings growth for these workers hit its fastest pace since March 2024.

This is certainly one for the positive check box into Friday's payrolls as robust consumer spending and strong economic growth has underpinned the resilience of the labor market, enabling some firms to expand their workforces despite lingering cost pressures. 

Perhaps most importantly, consistent hiring can help keep unemployment low and allow the Fed to stay focused on fighting inflation.

The Democratic midterm sweep threatens to complicate President Trump's "America First" agenda. Still, the biggest risk to the nation's industrial revival is at the state and local levels, as Democrats are set to push data center moratoriums.

At the state level, Democrats' sweep of Texas will likely deliver a particularly hard blow to Musk, who uprooted operations to escape California Democrats years ago. Now, Tesla and SpaceX are clear targets for Texas Democrats.

Lefty James Talarico was elected as Texas senator, and Gina Hinojosa was elected governor, making them the first Democrats to win either office in more than a generation. These Democrats have called for immediate AI regulation and a moratorium on data centers, and there will likely be immense state-level lawfare against Musk's Tesla and SpaceX empires.

The market seems to have priced in this fate for Musk's empires, as Tesla and SpaceX are both down nearly 6% in premarket trading.

Musk, a top Republican donor, had contributed nearly $450 million to GOP coffers and urged his X followers to vote against Democrats.

First New York's Vikram Rai told Bloomberg during an interview last week that both Tesla and SpaceX "have major headline risk if we get a blue sweep."

Goldman expects: 

On AI and data center regulation, Democratic wins at the state and local level are likely to have significant implications. The Democratic side explicitly campaigned on stricter data center regulation, that could end certain tax breaks (a priority for Hinojosa), tighten environmental, water, and electricity rules, and make it easier for localities to impose their own moratoria. 

Goldman continues: 

The states where Democrats are likely to further restrict data centers account for roughly 45% of planned US data center capacity, with Texas alone accounting for roughly 25%.

However ... 

We expect that the issue will fade somewhat in importance in the ensuing months and that these moratoria will not be long-lived if they are enacted. However, since data centers are low on the list of priorities for voters this election, we expect that the issue will fade somewhat in importance in the ensuing months and that these moratoria will not be long-lived if they are enacted.

Nasdaq futures tanked overnight, then ripped higher as Democrats won majorities in the House and Senate. But the trillion-dollar question is how the AI boom will continue with so many governors now opposed. The data center buildout is critical to Trump's reindustrialization policies and efforts to bolster the economy, and one can only suspect that Dems will use their newfound power to derail data center buildouts and crush the economy ahead of the 2028 election.

Goldman on governors:

Republicans lost the gubernatorial elections in Texas, Ohio, Nevada, Georgia, and Michigan, and Democrats gained a trifecta in Pennsylvania and likely in Arizona as well. In each of these states except Ohio, the Democratic side explicitly campaigned on stricter data center regulation, and we expect Democratic governors in Texas, Georgia, and Michigan to impose conditional moratoria pending new legislation restricting data centers.

"Guess my election-interfering space lasers didn't work this time," Musk joked on X overnight.

He added, "Data centers in space looking pretty appealing right now."

Which leaves us with another question: Will Musk stay in Texas?

Authored by Victoria Friedman via The Epoch Times,

President Donald Trump's interventions are helping to keep the Russia - Ukraine war from descending into global conflict, Belarusian President Aleksandr Lukashenko said, as representatives from Kyiv and Moscow prepare to meet for talks mediated by the United States.

"Trump is essentially keeping the world, for now, from World War III, which could erupt as a nuclear conflict," Lukashenko said during his address at the 4th Minsk International Conference on Eurasian Security on Nov. 3, according to the Belarusian state news agency BelTA.

He added that such a conflict would not spare any nation, even if it were on the other side of an ocean, suggesting it was of global interest for tensions to ease in his region.

Lukashenko also said that Trump should get the Nobel Peace Prize "even just for keeping Europeans from triggering a nuclear conflict."

"Even without realizing it, he is truly restraining Mother Europe from World War III, which could ultimately end in a nuclear catastrophe," he said.

The Belarusian president made the remarks after U.S. special envoy Steve Witkoff announced that the United States will mediate working-level negotiations between Russia and Ukraine on Nov. 10 - Nov. 11 in Abu Dhabi.

Minsk is a close ally of Moscow, and Lukashenko allowed Russian President Vladimir Putin to use the country as a launchpad to invade Ukraine in 2022, later agreeing to let Russia station tactical nuclear missiles on its territory.

Despite the close ties between Russia and Belarus, Lukashenko has said that Belarus was not looking to join the conflict, urging a peaceful resolution to the war.

On Tuesday, the Belarusian president said that pulling his country into the conflict would be a "terrible escalation, very dangerous and very unprofitable for us."

He went on to say that Minsk was ready to help end the war, offering to host negotiations to try to bring a peaceful resolution.

Talks in Abu Dhabi

Witkoff said on Monday that the three-way talks between Ukraine, Russia, and the United States in Abu Dhabi next week would focus on de-escalation and the next steps towards peace, as well as humanitarian efforts and post-war security arrangements.

"We look forward to building on the progress made in Kyiv, Oslo, and St. Petersburg toward a comprehensive, durable peace agreement that delivers lasting security for generations to come," the U.S. envoy said in a post on X.

He added that U.S. negotiators will meet this week in Brussels with representatives from France, Germany, the UK, the European Union, and NATO, to discuss security guarantees for Ukraine and economic opportunities to support the country's post-war reconstruction, as well as Europe's security architecture.

Commenting on Witkoff's announcement that the United States will mediate these negotiations, Putin aide Kirill Dmitriev said in a Nov. 3 post on X that "the world appreciates the peacemaking efforts of President Trump and his team."

The White House said in a Nov. 3 statement that First Lady Melania Trump will host representatives of Russia and Ukraine on Nov. 5.

This follows her efforts to successfully secure a limited ceasefire in Oleshky and the surrounding Kherson region.

"This achievement marks an unprecedented diplomatic initiative by an American first lady," the statement said.

Melania Trump will deliver remarks on the ceasefire on Thursday at the White House.