Nov 3, 2026 · 43 min
Markets brace for midterm volatility as AI valuations face scrutiny
Closing Bell 11/3/26
Investors are balancing election-driven uncertainty against demanding AI valuations, shifting earnings signals, and a narrowing set of defensive and cyclical opportunities.
- 1Election uncertainty and possible gridlock are keeping investors focused on volatility, positioning, and the market’s post-midterm reaction.
- 2Elliott’s warning about AI-related leverage sharpens questions around semiconductor valuations, earnings expectations, and whether the trade has peaked.
- 3Portfolio strategists are trimming equities, favoring high-grade municipal bonds and large-cap technology while watching financials and small caps.
Don't miss
Oliver Renick reports overwhelmingly call-heavy options activity in First Solar and SolarEdge, suggesting traders are positioning for a Democratic election outcome.
The brief
With the midterms approaching, the panel weighs possible volatility and divided government against a market already unsettled by mega-cap earnings and AI valuations.
Elliott Investment Management’s warning about AI-related leverage becomes the episode’s central tension: strong earnings growth may not justify semiconductor expectations indefinitely.
AMD, Apple, and AI infrastructure companies anchor the earnings discussion, while Pfizer, Disney, and Shopify show how uneven guidance, costs, and demand are shaping stock reactions.
Richard Saperstein describes trimming equities for high-grade municipal bonds while retaining large-cap technology, a defensive posture that still leaves room for selective growth.
Options activity in First Solar and SolarEdge points to a sharp clean-energy election bet, while analysts debate whether financials and small caps offer better value.
Michael Santoli and Oliver Renick help frame the closing question: can semiconductors recover after their decline, or has the AI trade lost its momentum before AMD reports?
What was said on this episode
30 statements · 18 positive · 10 negative · 2 neutral
Democrats will take the House.
“Democrats take the House.”
Listen at 4:42
Divided government will prevent major legislative action for two years.
“nothing's going to happen for two years.”
Listen at 5:06
Divided government will have little effect on markets over two years.
“I just don't think it's going to factor very much over the next two years.”
Listen at 5:35
High-quality bonds are available at approximately 8% yields.
“you can get high quality paper at 8%.”
Listen at 6:05
Bond yields may be near a local peak.
“you could see local peak bond yields.”
Listen at 6:48
Four-percent nominal GDP growth next year would support stocks.
“4% nominal GBP next year, that's really good mood music for stocks.”
Listen at 6:51
Semiconductor valuations suggest earnings are near a peak.
“semiconductors trading at 16 and a half times forward earnings. That's a multiple that suggests that we're near a peak in earnings.”
Listen at 7:02
Semiconductor earnings estimates are expected to double within three years.
“earnings estimates, they're expected to double over the next three years.”
Listen at 7:09
June may have marked the semiconductor market peak.
“June could have been the peak in semiconductors.”
Listen at 7:49
Semiconductor stocks could rally 25–30% tactically.
“You could see a 25, 30 percent rally just to get back up to a downtrend line.”
Listen at 7:57
Investors can rotate into nontechnology stocks while awaiting semiconductor confirmation.
“if you're picking individual stocks, that's a good chunk of stocks that you can invest in and rotate as you wait for some confirmation that maybe semis haven't peaked.”
Listen at 10:29
Consumer staples trade at a 29% premium to the S&P 500.
“You have staples trading at a 29% premium to the S&P 500.”
Listen at 11:53
AI investment may produce excess data centers and power capacity within two years.
“By one or two years, we'll have built too many data centers, too much power, too many gigawatts are coming online.”
Listen at 13:09
Investors should favor concentrated portfolios rather than diversification.
“you want to be concentrated”
Listen at 14:02
Market earnings growth will slow from 36–40% this year to 15% next year.
“You have a market that's going to grow earnings by 36, maybe up to 40 percent this year. That slows to 15 percent next year.”
Listen at 16:05
Apple can absorb higher memory costs better than Android and Windows makers.
“Apple can also absorb higher memory costs better than Android and window makers.”
Listen at 17:07
AI chatbot search diversion could reduce payments Google makes to Apple.
“if AI chatbots keep pulling searches from Google, the concern. is that payments to Apple could then fall.”
Listen at 17:47
High-grade municipal bonds offer 4.5–5% tax-free yields.
“yields are 4.5%, 5% tax-free.”
Listen at 25:23
“they're trading at a 455, five and a quarter percent tax free yield.”
Listen at 26:22
The firm continues to favor large-cap technology.
“we still like large-cap technology.”
Listen at 27:35
The firm’s portfolio is concentrated in large-cap growth.
“we're concentrated in large-cap growth.”
Listen at 28:22
Investors should not exclude Google from portfolios now.
“So I wouldn't really just throw the company out of a portfolio right now.”
Listen at 29:21
Microsoft, Amazon, and Google funds from operations grew 150% on average over three years.
“the growth of funds from operations over the last three years. It's averaging 150%.”
Listen at 30:07
Microsoft and other large technology companies are under-leveraged.
“Microsoft is under-leveraged. These companies are under-leveraged.”
Listen at 30:44
Markets may experience relief after the midterms if results meet expectations.
“you will have an exhale, perhaps, after the midterms, assuming they go roughly as expected.”
Listen at 33:34
Solar ETF options volume exceeded 20,000, with 99% calls.
“That fund usually trades around 500 to 1,000 options max per day. And today it surpassed 20,000 and 99% of them are calls.”
Listen at 34:56
Defensive market sectors have risen too far or too quickly.
“I think they've run too far or too fast.”
Listen at 39:45
Financials and asset managers are attractively cheap.
“I think areas like financials, asset managers actually are. are cheap.”
Listen at 40:28
The AI trade does not currently appear fully intact.
“It doesn't feel like it at the moment.”
Listen at 40:46
The semiconductor selloff appears excessive.
“the semi-trade broadly has seemed overdone to us”
Listen at 41:44
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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