Midterm election results sent shockwaves through the stock market, with technology shares taking a heavy beating, yet several Wall Street strategists quickly issued buy signals, arguing the selloff represents an entry opportunity rather than the end of the bull market.
On Thursday, the S&P 500 plunged 4.4% in a single session, while the Nasdaq 100 plummeted 6.4%, erasing more than $3 trillion in market value. The trigger was a sweeping Democratic victory across the Senate, House, and multiple gubernatorial races, with many newly elected candidates pledging to restrict data center construction and tighten industry oversight, sparking fears that AI infrastructure investment will face policy headwinds. On Friday, the S&P 500 edged up 0.3%, but since Tuesday's election results emerged, the index has still fallen 2.5% cumulatively.
According to a Bloomberg report dated November 7, Morgan Stanley's chief U.S. equity strategist Mike Wilson stated unequivocally that "the next two to three weeks are the time to add exposure," maintaining his year-end S&P 500 target of 8,000 points, which implies roughly 8.4% upside from Friday's close. Yardeni Research's chief investment strategist Ed Yardeni similarly characterized the decline as a "correction" rather than a bursting bubble, with a year-end target of 7,900 points.
Election outcome exceeded expectations, catching Wall Street off guard
The ferocity of the selloff caught most Wall Street trading desks by surprise. On Wednesday, after the election results were announced, the S&P 500 initially rose 1.6%, and several institutions were still advising clients to buy on dips.
Scott Rubner, head of equity and derivatives strategy at Goldman Sachs, wrote in a client note on Wednesday that "investors have considerable room to rebuild risk exposure, and as uncertainty fades and the market's largest buyer group gradually returns, the path of least resistance for U.S. equities remains upward through year-end."
Yet just one day later, the situation took a sharp turn. By Thursday's close, the S&P 500 had lost more than $3 trillion in single-day market value, a decline so severe that earlier optimistic forecasts appeared overly hasty.
Despite the heavy blow, most strategists held firm. According to Bloomberg-compiled data, the average year-end target for the S&P 500 among major Wall Street institutions stands at 7,973 points.
Seaport Global Holdings' chief equity strategist Jonathan Golub set the most bullish year-end target at 8,200 points. "It would be unwise to rush for the exits after the market makes only a minor adjustment to the election outcome," he said. "I am a firm buyer."
Ed Yardeni said on Thursday that "we experienced an AI bubble, and the bubble is slowly deflating, but deflating does not equal bursting—bursting means a major negative shock to the economy, and I don't think that will happen." He added that he had previously anticipated buying opportunities would emerge after the election, and "now we are starting to see some fairly good opportunities."
AI trade under pressure, semiconductor index down over 30% from its peak
The core tension behind the decline lies in the market's repricing of AI investment prospects. The Philadelphia Semiconductor Index plunged 12% on Thursday, bringing its cumulative decline from its June high to 36%.
Ohsung Kwon, chief equity strategist at Wells Fargo, noted that "semiconductor and AI infrastructure trades have been the primary force supporting the market this year, and this sector will remain under pressure. For the market to move higher from current levels, high-beta trades need to contribute." Kwon's year-end target of 7,700 points is relatively conservative among major institutions.
However, Kwon also suggested that if concerns about AI investment contraction continue to fester, tech giants like Alphabet and Amazon could actually find some support—the market expects these companies will be forced to cut capital expenditures, thereby improving earnings expectations. "We don't want to be overly bearish here," he said.
Whether the S&P 500 can achieve a year-end rebound still hinges most critically on the direction of the AI trade. Multiple strategists believe this selloff signals that the recent correction is nearing its end, rather than a prelude to the demise of a four-year bull market, but whether that judgment holds will depend to a large extent on the actual policy impact on AI infrastructure investment.
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