Tech Stock Rout Shifts Central Bank Focus to Growth
A massive technology stock selloff following U.S. midterm elections has lowered expectations for December interest rate hikes as investors fear slowing global economic growth.
A deepening rout in technology stocks has shifted investor concerns from inflation to global economic growth, wiping out trillions in market value. The selloff included the Nasdaq's deepest one-day drop since April 2025, following a sweep by U.S. Democrats in midterm elections. This political shift sparked fears of increased AI scrutiny and new restrictions on data center construction.
The Federal Reserve System and the European Central Bank now face a dual challenge of balancing persistent inflation and energy price surges caused by the war in Iran against the risk of slowing growth. Market probabilities for December interest rate hikes by the Federal Reserve dropped from over 80% to roughly 70%, while bets for a European Central Bank hike fell from 75% to 60%. Traders also see a 58% probability that the Bank of Japan will leave rates unchanged next month.
The downturn has had significant international impacts, with Taiwan experiencing its worst weekly share performance since 2001. South Korea remains highly exposed due to its reliance on semiconductor investment and data-center exports. The International Monetary Fund warned that a steep drop in AI investment could reduce global GDP by 1.1% by 2028.
