S&P 500 Falls 4.4% Thursday as Trump Blames Democrats' Midterm Win

The S&P 500 fell 4.4% on Thursday, Nov. 5, its worst day since the April 2025 tariff announcement. The Dow Jones Industrial Average dropped 1,833 points, or 3.4%, and the Nasdaq sank 5.5%.

Early Friday, the Nasdaq was up more than 1.5%, the Dow was up slightly and the S&P 500 was up about 1%.

President Donald Trump has a one-line explanation. "The Stock Market crashed today because the Dumocrats had a big Tuesday — So sad to see, you only have yourselves to blame!" he wrote on Truth Social. In a second post he said it "took so much work to get us to a level that no one has ever seen before, and then this."

The election and the timeline

Democrats took control of both chambers of Congress for the next term, with wins in Ohio, Texas, Iowa, Maine, Michigan and Kansas. Trump had spent nearly every day of the previous month holding rallies in several states.

The timeline complicates the president's explanation. Markets dipped in early Asian trading after the results, then rallied Wednesday as investors digested them. Berenberg chief economist Holger Schmieding said voters had "rejected Trump and his somewhat authoritarian penchant for crony capitalism," which he called a positive because it shows "US institutions and its checks and balances work."

The Guardian reported that markets took Trump's concession and his acknowledgment of the Iran war's impact as a positive. It also reported that Trump warned he will become "Mr Veto."

No source in this reporting identifies a specific trigger for Thursday's drop. Trump's explanation is his own.

The Iran war and the price of everything

The U.S.-Israeli war on Iran began in February. It led to the closure of the Strait of Hormuz and what the Guardian called the biggest energy price shock of the modern era.

Diesel prices hit a record high in August. Headline U.S. inflation has risen to 3.7%. The International Monetary Fund expects global headline inflation to reach 4.7% this year, with energy-importing countries hit hardest.

Brent crude fell as much as 9% on Wednesday to trade below $100 a barrel for the first time in a month, amid hopes of a diplomatic breakthrough. At about $94, it is still well above the prewar level of roughly $70.

Vice President JD Vance, in his own post-mortem, listed four reasons Republican-leaning voters went Democratic: the Iran war, the cost of living, the U.S. government's relationship with Israel, and a lack of "America first" policies. "Our voters showed up," he wrote, citing "a pollster who nailed the results."

Breitbart columnist John Nolte argues the strikes on Iran were right on the merits but cost Trump politically. In his telling, the mistake came after the opening strike. He says Trump should have declared victory and left by July instead of negotiating, and that the drawn-out war drove up gas and diesel prices into the midterms. "Trump was elected to bring down energy prices and the cost of living," Nolte wrote.

The Fed gets a new overseer

The most concrete consequence is institutional. Interest rates are set by the Federal Open Market Committee. Seven of its 12 members sit on the Fed's Board of Governors, and every one of those seats is a presidential appointment that needs Senate confirmation.

The Senate changes hands Jan. 3. An MS NOW opinion column counts Democrats at "at least 54 seats" and argues the shift strips Trump of the ability to install loyalists on the board. The column points to the Fed seat vacated by Adriana Kugler in August 2025, when Trump tapped Stephen Miran, already chairman of the White House Council of Economic Advisers, as a temporary replacement. Senate Republicans took a little over a month to process that nomination.

Sen. Elizabeth Warren of Massachusetts is next in line to chair the Senate Banking Committee, which has jurisdiction over the central bank.

The same column says the Justice Department opened a criminal probe of then-Fed Chair Jerome Powell this year "intended to force him out." Kevin Warsh has since succeeded Powell and is about to enter his sixth month as chair.

Trump has pushed for lower rates all along. After the Fed raised its target range to 3.75%-4.00% in September, he said rates should be at 1% "or less." Inflation sits well above the Fed's 2% target.

What comes next

Traders also expect Democrats to take a tougher line on AI regulation and the buildout of data centers, which have been a driver of stock gains. On Friday, Trump said he is "100% in favor of Super Intelligence (SI)" and will work with states that want data centers, calling them "GOLD."

The Guardian also reported concern that Trump, with his domestic leverage reduced, could take a more aggressive approach abroad, including escalating in Iran. Trump has promised markets that America will be "BIGGER AND STRONGER THAN EVER BEFORE."

Whether that happens depends on two things: whether the diplomatic breakthrough investors hoped for on Wednesday arrives, and who Trump nominates to the Fed board once Democrats control the confirmation vote on Jan. 3.