NOTES STORYBOARDS PULSE PORTFOLIO WEBINARS

Market Update Friday, Nov. 6

Epsilon Theory

November 7, 2026·webinar

Talking about the election and its impact on markets, all through the lens of what we’re seeing in narrative-world. Two main discussion points:

  1. Like the debate performance was for Joe Biden, the midterm election results were a common knowledge moment for Donald Trump. In both cases, we all saw what we all saw – the emperor has no clothes – and there’s no going back to policies or political dynamics that rely on a belief that he does. If you’re a political actor trying to recapture that belief structure or you’re a market actor behaving as if the belief structure were still in place, you’re going to lose. More directly, this means that tariffs as foreign policy are finished, as is the Iran War. Both will linger and resurface from time to time, but they’re done. There’s no more juice in the threats and the announcements. It’s all getting wound down.
  2. The AI capex and datacenter buildout issues at the heart of market losses over the past few weeks are increasingly being autotuned into political red/blue issues. Trump is trying to claiming pro-AI as a pure GOP position, and he’s probably going to be successful because most Dems can’t see beyond an anti-Trump, anti-tech billionaire position as a political winner (and because many Dems are in fact just anti-AI). This is not good for markets and it’s not good for the United States, but this is what is happening. At the same time, however, you’ve got some Dems (like Hinojosa in Texas) staking out some purple-ish statements that aren’t autotuning on a binary political scale. This is the big narrative struggle I’m watching.

Related to the points above, I’m reducing exposure in the model portfolio, exiting long positions in energy (XLE) and exiting short positions in broad consumer and financials (XLY, XLF and KRE). The model portfolio was +3.5% in yesterday’s rout.

 

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