US stock market rotation broadens beyond AI after Democratic sweep

US equities can broaden beyond the AI trade as resilient earnings, improving sector breadth and a divided US government support a stock-pickers’ market.

• Democrats won control of both congressional chambers, while the president retained veto power, limiting the scope for major policy changes and creating debt-ceiling risk.
• A slower cloud-capacity buildout could delay AI revenues and weigh on semiconductors and infrastructure, while broader economic momentum may allow rotation into other sectors.
• Global manufacturing PMI remained in expansion at 52.6 in October, Chinese exports accelerated 36.3% year on year in September, and China’s official PMI slipped to 49.3 while its private PMI reached 52.0.
• US non-farm payrolls rose by 165,000, unemployment fell to 4.1%, and wage growth declined by 10 basis points to 3.1%, although 339,000 additional people worked part-time for economic reasons.
• Robeco kept long global equity positions with a US preference, reduced European rate exposure through higher high-yield hedging, added US dollars against euros, and remained cautious on oil.

Takeaway: Investors should expect wider dispersion and seek winners beyond AI while monitoring credit spreads, financial conditions, Middle East tensions and the risk that weaker AI capital spending undermines US earnings and consumption.