Prediction: Nov. 3 Will Be a Huge Day for the Stock Market

Tuesday, Nov. 3, 2026, will help determine the direction of Washington for the next two years. Voters will decide whether Republicans keep control of Congress or Democrats gain enough seats to put a check on President Donald Trump's agenda.

Elections always have major implications for the stock market, but with 49% of the S&P 500 (SNPINDEX:^GSPC) tied to artificial intelligence (AI) -- an industry whose future could be radically reshaped based on a number of potential shifts in policy -- this one could have an outsize impact.

Here's what investors should be watching.

Stock market history after midterm elections is encouraging

First, despite what you might think, midterms tend to be good for the stock market. While there can be some near-term turbulence as the market digests the results, the historical record is pretty positive at the one-year mark.

Since 1950, the S&P 500 has gained an average of 15.1%, excluding dividends, in the 12 months following midterm elections, according to the investment management firm Capital Group.

Midterms in the U.S. tend to go the wrong direction for the party of the current President, often leaving the country with a divided government. That makes it harder -- especially in recent history -- for either party to push through sweeping changes. And while that sort of gridlock is frustrating for voters, the market tends to like the stability and lack of uncertainty gridlock brings.

This could be especially true at a time when bond investors are eyeing the federal debt with increasing suspicion. Gridlock would likely mean no major increases in spending or major tax cuts for the next two years, which in turn could help keep yields steady.

How the midterms could affect AI stocks and data center spending

Building data centers and filling them with chips is expensive, and companies -- even the massive hyperscalers like Meta (NASDAQ:META) and Amazon (NASDAQ:AMZN) -- are increasingly borrowing to pay for it. And that dynamic makes the industry highly sensitive to borrowing costs -- bond yields. If borrowing becomes expensive enough, it could shift the math on the AI buildout. Larger players might pull back on spending, less certain of a return on capital, while smaller, heavily indebted players -- the CoreWeaves (NASDAQ:CRWV) and the TeraWulfs (NASDAQ: WULF) of the world -- might find themselves without the financing they need to survive.

Of course, there are other implications that may work in the opposite direction. A big one: Democrats have been more broadly opposed to data center building and friendly to implementing moratoriums on their construction than their Republican colleagues (though the issue is starting to look more like a rare area of common ground). A Democratic sweep could portend more regulatory difficulty for the AI industry.

Why Treasury yields may tell investors more than the S&P 500

In truth, no one can predict just how tomorrow's results will play out in the market. However, I think it's safe to say that whatever happens will undoubtedly have major implications for investors. I would look past whether the S&P 500 moves up or down in the coming days and pay attention to how Treasury yields respond. I think that will tell you much more.

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Meta Platforms. The Motley Fool has a disclosure policy.