The Macro Implications of the Blue Tsunami

Joe Weisenthal and Tracy Alloway open by revisiting their Nate Silver episode, noting that his prediction of a Democratic “blue wave” was technically right but understated the result: Democrats won both the House and Senate. The House had been viewed as a lock, while the Senate was widely treated as a coin flip; Silver had pushed back and said Democrats were in a stronger position. The hosts ask what Democratic control means for markets, the economy, tariffs, executive orders, and future Federal Reserve appointments. Stocks initially rose about 1.5% after the result, contradicting Michael Hartnett’s warning that an S&P 500 Democratic victory could fall 10%, although the Nasdaq was being hit as they recorded on November 5.

Guest Skanda Amarnath of Employ America says the Senate matters disproportionately because it determines who sits on the Supreme Court and Federal Reserve Board. Its Republican advantage comes from representing states rather than people: sparsely populated Kansas, Iowa, or Wyoming receive the same two votes as New York. He argues the election showed Democrats may have a sustainable path to compete in states where they previously expected little, citing surprising strength in South Carolina and Mississippi. Even if some victories prove temporary, six-year Senate terms mean the result could influence government and Fed appointments for years, while Democrats may adjust their agenda and electoral maps around newly plausible wins.

Amarnath expects divided government to make policy harder to pass, especially during a crisis, though he notes Congress managed substantial COVID-era legislation in 2020. He sees limited potential for Republicans to split with Trump because tariffs and war were two issues where policy visibly affected voters. Agricultural states may be especially vulnerable to tariff costs, and Senator John Thune is described as unlikely to favor aggressive tariffs, but tariffs are being imposed through executive orders, so restricting them would require Republicans to cooperate with Democrats against the president. Amarnath calls that a tail scenario rather than the central expectation.

Early county returns showed unusually large swings, with some places moving roughly 20 points between comparable House races rather than the five-to-eight-point shifts seen in Florida. The hosts focus on Texas, where Democrats appear to have won statewide races and control over institutions including the comptroller, lieutenant governor, education board, and potentially University of Texas regents appointments. They describe the result as Texas becoming not merely purple but “hardcore” blue, an outcome that overturns years of assumptions about the state. Amarnath says the scale creates new possibilities for Democrats and challenges corporate America’s long-standing view of Texas as the ideal business environment.

The hosts connect Texas’s political change to its creation of a business court. Companies and founders have been looking for alternatives to Delaware after disputes over shareholder obligations, and Elon Musk’s move to Texas was presented as partly motivated by wanting a friendlier incorporation environment. Amarnath says the election is a reminder that political conditions can change the value of a supposedly stable business jurisdiction. They also discuss California, where a billionaire-backed wealth-tax measure failed and Proposition 42 was winning by a wide margin; the latter would prohibit new taxes on personal property such as business holdings, intellectual property, and financial assets.

Amarnath says data-center construction may be shaped more by economics than election results, since investors were already questioning whether ever-larger capital expenditures produce adequate returns. Anthropic’s S-1 and the broader AI buildout have raised the issue of whether companies should keep funding the frontier or prioritize capital efficiency. Politically, however, the shift is significant: governors in Texas, Georgia, Pennsylvania, Ohio, Virginia, and Wisconsin now face a changed environment, after tax breaks and data centers had once been broadly welcomed. OpenAI’s reported decision to stop using nondisclosure agreements and avoid making residents bear data-center electricity costs illustrates the corporate response to local backlash.

The hosts note that rental prices for Nvidia H100s rose even as political concerns grew. Amarnath distinguishes among chip designers and equipment suppliers, which benefit from maximal construction; frontier companies such as Anthropic and OpenAI, which need capacity but must eventually show sustainable profits; and hyperscalers, for whom the buildout resembles an expensive arms race. Meta and other incumbents could benefit if construction slows and capacity becomes scarcer, while companies are increasingly financing capital expenditure through bonds and, in Oracle’s case, new equity. The discussion raises Malaysia as a possible beneficiary if compute demand grows but less of the infrastructure is built in the United States.

Amarnath says a president’s nominees usually face less scrutiny from senators of the president’s party, but Trump previously failed to get several Fed nominees—including Judy Shelton, Steve Moore, and Marvin Goodfriend—through a Republican Senate. Jerome Powell’s term ends in early 2028, and Amarnath thinks a vacancy then could be difficult to fill if Democrats control enough veto points, unless a nominee quickly wins Democratic trust. He does not expect the Fed Board itself to become as overtly partisan as the Supreme Court, noting that Chris Waller and Philip Jefferson have not split along obvious party lines, but says Trump’s public desire to push policy in a particular direction creates additional institutional friction.

Amarnath rejects the idea that the non-AI economy is simply collapsing: it is not spectacular, but it is “fine,” with housing still notably weak. If AI capital expenditure cools, he doubts another sector such as housing will offset it quickly, because AI-sensitive technology hardware, software, and industrial equipment have grown to nearly 8% of GDP. On inflation, he identifies energy and transport costs linked to the Strait of Hormuz and Russia-Ukraine-related refining problems, possible food-price pass-through from retailers, continuing AI-related price pressure on laptops and memory, and tariffs that have not yet fully reached consumers—particularly in autos. He expects inflation could remain around 3% longer than anticipated.

Amarnath calls Jon Ossoff a reasonable early favorite for the 2028 Democratic nomination because of his Senate margins, while also naming governors Andy Beshear and Josh Shapiro as possible contenders. He stresses that the field is large and flat, with no obvious front-runner. In the closing discussion, the hosts say Tesla and SpaceX—companies associated with Elon Musk’s political spending—fell sharply, with Tesla down about 10% and SpaceX another 7% to 7.5%. They question what Musk gained from politics and argue that wealthy technology executives repeatedly mistake a coincidental electoral win for proof of their own influence. Sterling Infrastructure, a Texas data-center builder, is cited as an extreme example: its stock had fallen from about $1,000 in June to roughly $255.