US inflation has fallen less than expected, coupled with the change of power in Congress following the midterm elections, and several variables such as monetary policy, technology regulation, and industrial structure are simultaneously taking effect, putting considerable pressure on the market and household finances in the short term.

Monetary Policy: The window for a December rate hike has opened, but the risk of energy inflation transmission remains.

The Federal Reserve has already signaled a clear tightening stance. Governor Waller publicly stated that even if the upcoming October CPI data shows a slight cooling, he still favors a 25 basis point rate hike in December. If core inflation remains high, a single 50 basis point rate hike would need to be considered to maintain the central bank's credibility in controlling inflation. Currently, US inflation remains consistently above the 2% policy target, and the transmission effect of energy prices on overall prices is significantly stronger than before the pandemic. Research estimates suggest that a 10% increase in oil prices would raise core inflation (excluding food and energy) by 0.35 percentage points. Although oil prices have recently fallen below $90, if this level persists, it could partially alleviate inflationary pressures. However, supply bottlenecks in downstream refined oil products such as diesel continue to prolong the impact of energy inflation.

Political upheaval: Democrats gain control of Congress, tech companies face a period of intense regulation.

As monetary policy tightens, the US political landscape is shifting, with the Democrats gaining control of both the House and Senate. This will profoundly change the regulatory environment for the technology industry. During the campaign, the Democrats focused on the AI boom, data center expansion, and close ties between large corporations and White House officials. The Nvidia controversy coincided with this sensitive period, subjecting the Silicon Valley giant to more intensive congressional investigations. Many companies have already prepared legal teams to handle inquiries, and issues related to "crony capitalism" may even persist into the 2028 presidential election cycle. Furthermore, the new power structure in Congress will constrain the president's nominations of Federal Reserve officials, weakening the Fed Chair's influence on personnel matters such as the selection of vice chairs.

AI Industry: A Pillar of Economic Resilience, but Marginal Returns and Employment Patterns Are Changing

AI is a core driver of the resilience of the current US economy, but the industry itself is showing signs of divergence. On the one hand, AI is boosting corporate capital expenditure, supporting US economic growth, and many small and medium-sized businesses are using AI-powered operational tools to improve efficiency, resulting in a significant boost to online retail sales. On the other hand, the problem of diminishing marginal returns on investment is becoming apparent. Anthropic continues to increase its investment, but the rate of improvement in its model capabilities has slowed. Academics are also re-evaluating the long-term impact of AI on the labor market: AI may not directly replace jobs on a large scale, but rather standardize job skills, lowering entry barriers. This trend of commoditizing skills may suppress the wages of ordinary workers in the long run, rather than triggering a wave of widespread unemployment. Market predictions suggest that Anthropic's IPO window is approaching, with the probability of completing its IPO before November 20th soaring to 83%.

Fiscal Debt Debt Costs Are Being Paid Off Now; Public-Private Sector Funding Game Gains Attention

The debate over debt and fiscal policy continues to simmer in the market. Some argue that the cost of accumulated government debt is not being passed on to future generations, but rather has already been absorbed by the market, and that every government expenditure essentially crowds out private sector funds. Market participants are also closely watching whether the US economy can find a balance between suppressing inflation, maintaining growth, and stabilizing the technology industry, given the combined effects of interest rate hikes, regulation, and geopolitical conflicts.

Market Focus: Multiple key events unfold, risk repricing continues.

At the market level, the tech sector has already experienced a sell-off following the midterm elections, with investors repricing the risks of tighter AI regulations and slower capital spending. Athropic is currently rushing to complete its IPO, with market predictions suggesting an 83% probability of it being completed before November 20th. Some market observers believe that the recent decline in US stocks will not affect subscription sentiment, and that tighter AI regulations will not prevent existing or planned AI projects from being implemented; at most, they will simply be relocated. Readers should pay close attention to new narratives regarding AI. Several key events await resolution this week: the US October CPI data will be released, directly determining the Fed's subsequent interest rate path; the trilateral negotiations between Russia, Ukraine, and the US will begin in Abu Dhabi; Congress needs to finalize a fiscal spending plan by December 11th to avoid another government shutdown, and several Fed officials will also deliver speeches, providing the market with more policy signals.