Capital Economics: U.S. equities unlikely to reclaim their October highs in the near term

Joe Mah, a market economist at Capital Economics, noted in a report released on November 6 that even if market concerns over U.S. political prospects ultimately prove to be an overreaction—and even if U.S. equities rebound in the near term—it will be difficult for the market to revisit its early-October highs anytime soon. He analyzed that the immediate catalyst behind overnight market selloffs was investor anxiety over potential Democratic-led regulatory actions targeting the AI industry—both at the federal and state levels—as well as restrictions on data center construction. Mah emphasized that sentiment around AI-related trades had already shown fragility, and that U.S. equities themselves were exhibiting numerous classic late-cycle characteristics; against this backdrop, the current episode could serve as a key trigger, ushering in a longer-lasting cooldown phase for the AI stock rally.