1. US elections triggered a sharp technology sell-off

What happened? Tuesday’s US midterm elections delivered major gains for the Democrats, who secured control of both the House of Representatives and Senate.

Markets initially welcomed the result, with US shares rallying on Wednesday as investors anticipated greater constraints on government spending.

That reaction reversed dramatically on Thursday.

The S&P 500 technology sector fell 7.3%, while the Philadelphia Semiconductor Index plunged more than 12%, its worst daily performance in over six years.

The Nasdaq entered correction territory, having fallen more than 10% from its October peak.

Why markets reacted. Investors became concerned that tighter regulation could delay AI data-centre construction, particularly following Democratic victories in states where substantial infrastructure investment is planned.

Environmental concerns, electricity demand and local opposition to new data centres featured prominently during the election campaign.

Why this matters. The market had assumed that AI infrastructure spending would continue expanding rapidly.

Any regulatory delays could affect chipmakers, data-centre operators, electricity suppliers and companies financing these projects.

Friday’s recovery, which included an 11% rise in AMD, suggests investors haven’t abandoned the AI growth story. But confidence is becoming more fragile.

The Bank of England raised rates and warned inflation could reach 5%

What happened? On Thursday, the Bank of England increased Bank Rate by 0.25 percentage points to 4%, its first increase in more than three years.

Eight members supported the rise, while Catherine Mann preferred a larger increase to 4.25%.

The Bank also delivered a concerning inflation forecast.

With UK inflation already at 3.5%, policymakers now expect it to approach 5% by the middle of 2027, largely because of higher energy costs.

Why markets reacted. Investors had expected the rate increase, but the Bank’s inflation outlook reinforced expectations of further tightening.

Governor Andrew Bailey indicated that another increase could become necessary if energy prices remain elevated.

The UK 10-year gilt yield finished around 5.16%, having benefited from a wider movement into government bonds during the technology sell-off.

Why this matters. For UK investors, higher interest rates affect mortgage costs, savings returns, company borrowing and gilt valuations.

The Bank faces a difficult choice: raise borrowing costs to prevent inflation becoming embedded, without weakening an economy already facing pressure from higher household energy bills.

Strong US jobs challenged hopes of an interest-rate pause

What happened? Friday’s US employment report surprised economists.

The economy created 165,000 jobs in October, compared with expectations of around 65,000.

Unemployment fell to 4.1%, while earlier employment figures were revised higher by a combined 84,000.

Average hourly earnings increased 0.4% during the month.

Why markets reacted. Stronger employment suggests the US economy remains resilient, reducing the need for the Federal Reserve to support growth through lower interest rates.

Markets increased the probability of a December rate rise to approximately 80%.

Treasury yields and the dollar rose following the announcement, while gold fell.

Why this matters. The Fed faces a different problem from investors worried about falling technology shares.

A strong labour market gives policymakers room to maintain restrictive interest rates while addressing inflation.

For equity investors, the question is whether company earnings can continue growing sufficiently to offset those higher financing costs.

1. Tuesday: US inflation could decide December’s Fed meeting

October’s Consumer Price Index arrives on Tuesday 10 November at 1.30pm UK time.

This is probably the week’s most important economic release.

Following Friday’s strong employment figures, markets already expect another rate increase in December.

What could surprise investors?

Lower-than-expected inflation would provide relief to government bonds and potentially support technology shares.

Higher inflation would reinforce expectations of further tightening, pushing Treasury yields and the dollar higher.

Investors should concentrate on core inflation, particularly services, to judge whether underlying price pressures are easing.

2. Thursday: How strong is the UK economy?

The ONS releases its first estimate of third-quarter UK GDP on Thursday 12 November at 7am, alongside September’s monthly growth figures.

The Bank of England has recently upgraded its assessment of economic activity, suggesting growth has proved stronger than expected.

A stronger GDP reading could reinforce expectations that interest rates need to remain elevated.

Weaker growth would increase concerns about the effect of higher energy prices and borrowing costs on households and businesses.

For UK investors, watch gilt yields and sterling closely.

The challenge is finding a balance between controlling inflation and maintaining economic growth.

3. Technology earnings provide another AI test

CoreWeave, Applied Materials and Cisco report this week.

These results matter particularly after the sharp technology sell-off.

CoreWeave provides specialised AI computing infrastructure, making its financing arrangements and investment plans especially relevant.

Applied Materials offers insight into semiconductor manufacturing demand, while Cisco provides evidence about spending on networking equipment.

Strong earnings and convincing forecasts could restore some confidence.

Further evidence of rising borrowing requirements, delayed projects or weaker customer demand could prolong the decline.

4. Friday: US producer-price inflation

Friday brings the October Producer Price Index.

This measures price changes received by businesses for their goods and services, providing another indication of inflation pressures within the economy.

A strong reading following Tuesday’s CPI report would reinforce concerns about persistent inflation.

Conversely, easing producer prices would suggest that some of the pressure on companies may be diminishing.

The figures could influence expectations for the Fed’s December meeting and the direction of government bond yields.

Final Thought

Last week demonstrated how quickly market sentiment can change.

Technology companies that previously attracted considerable enthusiasm are now facing greater scrutiny over regulation, spending and future profitability.

Yet the underlying global economy remains reasonably resilient, with US employment growing faster than expected and corporate earnings continuing to provide support.

For long-term investors, the response shouldn’t be to abandon technology or attempt to predict the next market recovery.

It should be to ensure portfolios remain appropriately diversified, valuations are understood and investment decisions reflect long-term objectives.

Markets will continue to move between optimism and concern. Successful investing comes from maintaining discipline through both.