Election 'Blue Wave' & Your Wallet; Navigating AI-Driven Market Volatility

Kate Moore · Citi Wealth

Market moves around the midterms were technical, driven by investors projecting fears, not fundamentals.

Moore says investors are projecting their biggest fears about policy change into the market, and that policy for the next two years is unknown. The parties are not monoliths and have factions that must work together. What she saw in the last couple of days was incredibly technical and not fundamentally driven. Gridlock could also prove growth positive as legislators position for 2028.

“people are just projecting their biggest fears around change into the market. So what I saw over the last couple of days was incredibly technical and not fundamentally driven.”at 15:22

Kate Moore · Citi Wealth

Deficits will keep rising under either party, since neither has appetite to be deficit positive.

Moore reasons that the US is reaching critical deficit levels and that she is focused on the next four to six years. Deficits are rising under Republican or Democratic administrations alike, because everyone is spending or cutting taxes. Neither party has much stomach for deficit-positive measures, so this has to be baked into the market background.

“Well, I think we're reaching some critical levels... You know, it's my strongly held conviction that deficits are going up under Republican or Democratic administration because everyone's spending.”at 16:00

Kate Moore · Citi Wealth

Gold works as a partial replacement for duration in portfolios, offering less correlated diversification than bonds.

Citi has been underweight duration for a long time and Moore can't get comfortable adding duration. The team looked for a less correlated asset to balance equity risk and found gold performed those diversifying qualities in testing, so it is held as a partial duration replacement while still owning some fixed income. Moore also owns gold through an ETF as ballast against her growth-tilted equity portfolio. Critics who say gold doesn't yield in a rising-yield environment are answered by the portfolio-diversification case.

“I can't get comfortable with adding duration to portfolios. We've been underweight for a long time... we really wanted to think about how do we balance out some of our equity risk? What might be a less correlated asset? And we found that gold was a, you know, as we tested it, was performing a lot of those qualities.”at 18:06

Kate Moore · Citi Wealth

Yields are expected to rise, so Citi stays shorter duration than benchmark in multi-asset portfolios.

Citi keeps fixed income in multi-asset portfolios but stays shorter duration. Moore expects yields to rise, citing the bond volatility of the last couple of days, the fiscal situation, and strong labor-market data from that morning. Together these support higher real yields, and at minimum they give support at current levels.

“we're shorter duration and we're continuing to stick to that. And our expectation is that yields are going to rise like we saw a lot of that bond volatility in the last couple of days.”at 18:06

Kate Moore · Citi Wealth

Economic growth going into 2027 should be incredibly strong, supported by fiscal policy and labor data.

Moore argues the fiscal side combined with the morning's labor-market data supports incredibly strong economic growth going into 2027. Deficits are rising under both parties, and that spending supports demand. The strong growth outlook is the backdrop she expects for higher real yields.

“...the data this morning on the labor market supported this incredibly strong economic growth going into 2027”at 18:06

Kate Moore · Citi Wealth

Physical AI is an investment theme because labor shortages in manufacturing will keep growing.

Moore says Citi has been pounding the table on physical AI. Unfilled US manufacturing jobs were just over 400,000 a year ago and are about 25% higher now, without a big expansion in manufacturing capacity. People don't want these jobs, and immigration changes are not expected to reverse soon, while populations decline across much of the developing world. Demographics and worker preference will therefore drive a different layer of investment, in automation.

“we've been pounding the table on physical AI to be fair... at this time last year, we had just over 400,000 unfilled manufacturing jobs and it's 25% higher here in 2026.”at 20:51

Tim O'Brien · Bloomberg Opinion

Unwinding the Iran war and frantic tariff policies would give the economy a quick macro bump.

O'Brien argues there would be bipartisan support early on to address tariffs and the war in Iran, regardless of Trump. If the war is wound down and the frantic, irrational parts of tariff policy are unwound, the economy would get a pretty quick and early macroeconomic bump. The larger priorities after that are health care and wages.

“I think there'd be bipartisan support out of the gates regardless of Trump to address tariffs and the war in Iran. If that war got wound down and if... a lot of the frantic and irrational parts of the tariff policies got wound down, you would get a pretty quick and early macroeconomic bump from that.”at 30:20

Scarlet Fu · Bloomberg

The AI build-out is facing higher costs and doubts about whether it proceeds as planned.

Fu cites news that Microsoft is winding down its deal with Oracle to rent AI cloud capacity, after which Oracle shares fell more than 3%. She sees this as the AI trade possibly slowing, or even collapsing, as higher costs are embedded in the AI build-out and question marks now hang over whether it will proceed as planned. Her case rests mainly on the Oracle contract news and the cost pressure.

“what we're seeing with the AI trade perhaps slowing down, some people might even say collapsing. It's coming to fruition as we see a lot of higher costs embedded in the AI build out, and there's now question marks over whether that will proceed as planned.”at 34:24

Annamaria Lusardi · Stanford Institute for Economic Policy Research (SIEPR)

Trump accounts investing in low-cost stock index funds could be a good financial education experiment.

Lusardi argues that the Trump accounts design, where money is invested in very low-cost stock index funds, could work as a useful financial education experiment. She says early exposure to investing is needed and frames the plan as a test of whether young people learn from it. She offers no outcome data, so the view is a qualitative judgment about the policy's design.

“And also I think this idea that the money is going to be invested in stock index fund with a very low cost, I think is going to be a good financial education experiment.”at 43:25