You Ain’t Seen Nothing Yet with Daniel Clifton

Josh Brown describes feeling the change in Washington immediately: after the 2008 and 2012 elections, crowds celebrated near the White House, but that energy disappeared for 14 years until Tuesday night. He recalls being at the New York Stock Exchange on the 2024 election night and seeing Gen Z voters embrace Trump on TikTok, a sharp reversal from 2020. Daniel Clifton says the change was developing gradually, not caused only by gas prices: Trump was a brand promising to solve Biden-era inflation, while voters felt Democrats had taken their eye off their main economic promises.

Clifton compares Trump’s losses with Barack Obama’s first midterm election. Obama campaigned on fixing the financial crisis, then entered office and prioritized a $500 billion health-care effort while banks remained unstable; Democrats lost 63 House seats and eight Senate seats. Trump lost 45 House seats and seven Senate seats, making the pattern look similar: voters give a president a mandate for one job and punish him when other priorities dominate. Clifton says hard voting data from special elections had already shown Republican weakness before the war catalyzed the shift.

Clifton says voters in rural and Republican areas were increasingly angry about diesel, fertilizer, tariffs, and especially data centers. At town halls, residents objected to the physical structures, possible health effects, water use, noise, ecological damage, higher electricity costs, and the fear that AI would make middle-class jobs disappear. In 40 data-center referendums held Tuesday, 38 went against the industry. A Meta project even prompted voters to recall the three city commissioners who had approved it. Clifton says the technology industry failed to explain how AI would improve ordinary people’s lives.

After the election, Nasdaq futures initially fell about 3%, Nvidia dropped sharply, and data-center-related industrial, power-generation, real-estate, and semiconductor-equipment stocks were punished. Clifton says the market was correctly forcing investors to reduce capital-expenditure forecasts, potentially by 10% or more, rather than treating the vote as a minor political event. Microsoft, Amazon, and Google held up better because owning scarce computing capacity could become more valuable if new construction slows. He also says the market had been compressing AI multiples for a year, with earnings growth masking the valuation pressure.

Clifton says governors and local governments matter more than Congress because Ohio, Georgia, Texas, and Iowa represent a large share of expected data-center construction. Virginia illustrates the risk: after a $600 million tax increase, Blackstone withdrew its largest proposed project and Amazon canceled four already-zoned Northern Virginia centers. Louisiana’s “Beignet Project” is moving forward because it can place the facilities behind the grid, separating their electricity costs from consumers, embraces the jobs, and has mounted a better public-relations campaign. Clifton argues data centers can lower property taxes, but companies failed to explain that benefit.

Brown and Clifton identify several possible market positives despite the political shock. A de-escalation of the Iran war could lower oil prices and reduce the need for Federal Reserve rate increases; slower data-center construction would also mean less debt competing with Treasury issuance. Clifton expects the federal deficit to improve next year because roughly $600 billion to $700 billion of this year’s stimulus effects will roll off. He cautions that the Strait of Hormuz remains crucial: Iran’s civilian leadership may want a deal, but the Islamic Revolutionary Guard Corps may refuse one unless the strategic and existential risks change.

Clifton says the S&P 500 has not declined in the 12 months after a midterm election since 1938, with the average return around 14.8%. He attributes the pattern to markets pricing in bad news before the election and then discovering that the feared outcome is less damaging than expected. He recalls investors fearing a second financial crisis in August 2010, only for stocks to turn by Labor Day. Clifton says clients should wait for governors’ January speeches and legislative details to narrow the unusually wide range of outcomes rather than panic immediately.

Clifton remains bullish on healthcare, which has outperformed in 12 of the past 14 midterm-election years, as well as staples. He expects Democrats to seek a larger National Institutes of Health budget, which historically flows directly into life-science tools companies such as Thermo Fisher and Illumina, while AI could accelerate drug discovery. Medicaid managed-care companies including Centene, Molina, Elevance, and Tenet rallied because Democrats may block Medicaid cuts; a Texas expansion of Medicaid could further enlarge their addressable market.

Clifton expects Democrats to introduce an ambitious healthcare bill featuring roughly 50 annual drug-price negotiations and fewer protections for orphan drugs. He says the bill may never pass, but Democrats could use it to negotiate with President Trump over funding for the Iran war or other priorities. His expectation is a narrower compromise focused on global pricing for Medicaid drugs, which could hurt companies with large Medicaid exposure, such as Gilead or Vertex, more than the biggest pharmaceutical companies. He sees healthcare opportunities but warns investors not to treat the sector as uniformly safe.

A CNBC survey cited in the discussion found government corruption was one of the two most important issues for 36% of respondents, ranking above food, gasoline, and immigration. Clifton says concerns differ by region: Iowa voters discussed Don Jr.’s crypto deals, prediction markets, oil, and congressional stock trading rather than only border policy. He argues Democrats could make a durable political gain by banning congressional stock trading, especially now that Nancy Pelosi is leaving Congress and Ron DeSantis has criticized lawmakers who trade individual stocks. Brown says the election showed that voters are not simply willing to tolerate such conduct.