Washington Is Divided. The Market Likes It.
The midterm elections are behind us, and I know that's what's on most of your minds, so let's start there. Then I'll turn to the story I think matters most for your portfolio over the next year: the richest companies on earth have started borrowing to pay for AI.
1. The Election: Markets Like Certainty
Democrats won control of both the House and the Senate, according to projections by The Associated Press. With a Republican in the White House, Washington is now divided.
I'll be candid about where I stand. I'm pro-business and pro-America, and this isn't the result I was hoping for. But my job is to manage your money in the world as it is, not the one I'd prefer. And on that score, the market's verdict was clear.
The market took it well. By mid-morning Wednesday, the Dow was up more than 1,100 points (about 2.2%), the S&P 500 about 1.6% and the Nasdaq about 2%.
The bigger reason wasn't who won. It was that the result was clear, the President said he would accept it and work with the new Congress, and divided government makes sweeping legislation less likely in either direction. Markets can price a known outcome. What they struggle with is not knowing.
For business owners, there's a silver lining in gridlock. Any push for higher taxes or heavier regulation now has to get past the President's veto. Fewer surprises out of Washington is something both markets and business owners can plan around.
One detail worth noting: the largest technology companies rallied, but the AI cloud operators lagged. CoreWeave fell about 6%, after overnight worries that a Democratic Congress could be tougher on AI data center companies. It's a preview of the next story: the market is starting to separate the strong balance sheets from the borrowers.
Markets tend to react to elections for days and to policy for years. The areas I'll be watching for our clients, especially business owners and energy families: tax policy heading into 2027, energy regulation, and federal spending and borrowing — which feeds directly back into the interest rate story below.
2. AI Spending Moved from Cash to Credit
For three years, the largest technology companies paid for the AI build-out out of their own pockets. In October, that changed.
→ Amazon reported negative free cash flow of $42.4 billion over the trailing twelve months, driven mainly by data center spending. It kept its 2026 capital spending plan at about $220 billion and said 2027 will be "meaningfully more." The stock fell roughly 7% after the report.
→ Meta spent $34.9 billion on capital projects in the third quarter, more than the $32.8 billion its operations generated, and set out plans to raise up to $95 billion.
→ Alphabet's capital spending more than doubled from a year ago, to $51.4 billion for the quarter, pushing free cash flow negative. Earnings came in well below expectations and the stock fell about 8% after the report.
→ Microsoft, the strongest of the group, sold $25 billion of bonds, its first major investment-grade offering since 2017.
→ Oracle, the most indebted of the large players, reported about $125 billion in notes payable and borrowings, and is reportedly exploring a separate investor-funded entity to buy chips and lease them back — keeping that debt off its own balance sheet.
Across the industry, AI-related debt issuance reached $466 billion through September, up from $101 billion over the same period last year. The IMF noted that five companies (Alphabet, Amazon, Meta, Microsoft and Oracle) now account for almost 10% of all investment-grade corporate bond issuance worldwide.
Let me be fair to the other side. The demand is real. Amazon's cloud business grew 39%. Google Cloud more than doubled. Microsoft's Azure grew 48%. This is not a story about AI being a fad.
It's a story about who carries the risk if the payoff takes longer than planned.
The closest parallel I can find isn't 2008. It's the late 1990s, when telecom companies borrowed heavily to lay fiber-optic cable the world genuinely needed. The demand was real and the fiber eventually got used. But the build-out ran ahead of the revenue, and many of the investors and lenders who bought in near the top took heavy losses before it did. History doesn't repeat on schedule, and this comparison isn't a forecast. It is a reason to know how much of your portfolio depends on the AI build-out paying off on time.
3. Rates: The Fed Is Not Cutting
Many investors still assume rate cuts are coming. The Fed has gone the other way.
→ In September the Fed raised its target rate by a quarter point, to 3.75%–4.00%
→ On October 28 it held there, in a 10-2 vote. Both dissenters wanted another increase
→ The next decision is December 9
→ Earlier in October, the 10-year Treasury yield touched about 5.37%, its highest level since 2002
Why it matters: every dollar of that AI borrowing gets more expensive when long-term rates are this high. For families, it also means mortgage and business-loan costs remain elevated, and that cash and short-term Treasuries are paying a real return again.
4. A Custody Lesson from the Crypto World
On October 29, Binance, the world's largest crypto exchange, reported a security breach with an estimated impact of about $6.3 billion, believed to be the largest crypto theft on record. According to the company, it began with a single compromised laptop. Binance suspended withdrawals, roughly $3 billion was frozen with help from stablecoin issuers, and the company has said it will cover customer losses. Binance.US was not affected.
The lesson
The lesson isn't "crypto is bad." It's about custody. When you hold assets on an exchange, what you own is a claim on that exchange — and for a period this week, Binance customers couldn't withdraw at all. For our clients, assets are held at independent, regulated custodians (Fidelity and Charles Schwab), and you receive statements directly from them. If you hold digital assets anywhere, it's worth knowing exactly where and how they're held.
5. What I'm Watching
→ Big Tech free cash flow, not just earnings. The question has shifted from "how much will they spend" to "how will they pay for it."
→ Borrowing costs for AI-linked companies, including Oracle and the smaller "neocloud" data center operators.
→ Private credit valuations. Much of the AI build-out is financed in private markets that don't trade daily; I expect clearer marks in the first half of 2027.
→ The 10-year Treasury yield and the Fed's December 9 decision.
→ Nvidia's earnings.
6. Year-End: Eight Weeks Left
The planning conversations that matter most for 2026 have to happen in November, not the last week of December. Topics worth raising with your advisor and CPA now:
→ Roth conversions, especially if this year's income is lower than you expect in the future
→ Harvesting losses to offset gains, particularly after this fall's volatility in technology stocks
→ Required minimum distributions, including qualified charitable distributions if you're eligible
→ Charitable giving, including donor-advised funds and gifts of appreciated stock
→ Annual gifting to family
High Ridge Advisory and Csenge Advisory Group do not provide tax or legal advice. We coordinate with your CPA and attorney on these decisions.
How We're Approaching It
We came into the fall more defensive than usual. Our focus now isn't adding more caution. It's preparing a list of high-quality opportunities to act on if prices reset, and making sure each family's plan doesn't depend on any one part of the market working out on schedule.
For our clients: if anything has changed in your life or business, I'd rather hear about it now than in December.
If you want to refresh your plan or strategy, or know someone who needs to have theirs reviewed, let's schedule a time to visit. Just reply to this email or call me directly.
Who We Are and Who We Know
High Ridge Advisory is an independent, fiduciary wealth management practice in McKinney, Texas. We are not tied to any product, platform, or institution. Our only obligation is to you. We work with business owners, executives, energy families, landowners, and individuals navigating significant financial decisions.
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If you have a need — financial or otherwise — and you're not sure who to call, call us first. If we can't help directly, we almost certainly know who can.
That's what it means to have an advisor, not just an account.
Jay Madden
Founder & Lead Advisor · High Ridge Advisory
IAR, Csenge Advisory Group, LLC
972.632.5700
james@highridgeadvisory.com
208 E. Louisiana St., Ste. 301 · McKinney, TX
"I answer my own phone."
Investment Advisory Services offered through Csenge Advisory Group, LLC, a Registered Investment Advisor. High Ridge Advisory is not affiliated with Csenge Advisory Solutions. High Ridge Advisory and Csenge Advisory Group do not provide tax or legal advice.
Nothing in this newsletter constitutes a guarantee, promise, or projection of future investment returns or financial outcomes. All investment strategies involve risk, including the possible loss of principal. This newsletter is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to buy or sell any security. Companies named are discussed for illustration and are not recommendations. Market data is from third-party sources believed reliable but not guaranteed, and is as of the dates noted. Opinions expressed are those of Jay Madden and do not necessarily reflect the views of Csenge Advisory Group, LLC.
High Ridge Advisory | 208 E. Louisiana St., Suite 301 | McKinney, TX 75069 | 972.632.5700 | info@highridgeadvisory.com