The Democratic Party's victory caused US stocks to plummet! Analyst: Investors can enter the market at low prices

After the Democratic Party won a huge victory in the U.S. midterm election on the 3rd, due to market concerns that the Democratic-controlled Congress will tighten supervision of the artificial intelligence (AI) industry, technology stocks encountered fierce selling pressure on the 5th. The four major U.S. stock indexes fell sharply. Although many Wall Street analysts were caught off guard, they also said that the U.S. stock market fell deeply and rebounded on the 6th, indicating that the selling pressure in recent weeks is about to end, and investors should take advantage of this low to enter the market.

Mike Wilson, chief U.S. stock strategist at Morgan Stanley, said: "The next two to three weeks are the time for investors to increase their risk asset allocation."

After the midterm elections, the Democratic Party took full control of Congress and captured many states where Republicans had long been in power. Many new Democratic congressmen and elected governors threatened to review the development of data centers and strengthen regulatory measures. On the 5th, the Philadelphia Semiconductor Index plummeted 12%, the Nasdaq 100 Index fell 6.4%, and the S&P 500 Index also fell 4.4%. The magnitude of the decline caught many analysts off guard.

Still, Wilson remains confident that U.S. stocks will rebound and sticks to his forecast for the S&P 500 to reach its 8,000 target by the end of the year. On the 6th, the S&P 500 index closed up 0.3% as investors bought at dips. If Wilson's prediction is correct, this means that the S&P 500 index will still have room to rise 8.4% from its closing price on the 6th by the end of the year.

Wilson and other analysts believe the plunge is a sign that the recent sell-off in the S&P 500 is coming to an end, rather than a sign of a collapse in AI trading, which would mean more pain ahead.

Ed Yardeni, chief investment strategist at Yardeni Research, said: "We did experience an AI bubble, and I think that bubble is now dissipating. If the bubble 'bursts,' that means there will be a significant negative impact on the economy, but I don't think that will happen."

Wilson recommended investors hunt for bargains in consumer stocks, especially if interest rates and oil prices continue to fall, while Yardeni favored health care stocks.

"I think this is a retracement, and I expect there will be buying opportunities after the midterm elections, and we are starting to see some pretty good opportunities now," Yardeni said. He predicted that the S&P 500 index will rise to 7,900 points by the end of the year.

Kwon Ohsung, chief equity strategist at Wells Fargo, said that if market concerns about a slowdown in the pace of AI construction persist, technology giants such as Alphabet and Amazon that have previously caused investor panic by investing heavily in AI technology may provide some potential support as the market expects that they will be forced to curtail spending.