Nvidia stock slide and weak economic data cause markets to falter

The stock markets experienced renewed volatility on Tuesday, as Nvidia suffered a decline and new economic data disappointed. According to Ed Yardeni, this market "jitteriness" could persist until the elections before stocks resume their climb to new record highs. "We are currently seeing considerable market jitteriness. I believe this could last until the elections. After that, we will likely return to new record highs," Yardeni said in an interview with CNBC on Wednesday. In early August, the S&P 500 recorded a 3% drop, its largest daily loss since 2022, in a historic market downturn. This week, the volatility continued, with the indices registering their biggest losses since the August collapse on Tuesday. The decline in Nvidia shares and weak economic data in the manufacturing sector fueled new fears of an economic downturn. Ed Yardeni stated that the market's return to new record highs partially depends on the election outcome and that a deadlock is the preferred scenario for the markets. "If the Democrats or the Republicans win completely, I don't think the market will respond positively to such regimes," Yardeni explained. "The market clearly prefers deadlock." A stalemate in the Capitol often leads to sluggish legislation, which is preferred by the markets as it brings less uncertainty and fewer regulatory surprises. Data from LPL Financial shows that the S&P 500 has historically tended to rise during a divided Congress or a Republican-controlled Congress with a Democratic president. "I think that the stalemate will win," Yardeni said. "If that is the case, the market will rise, simply because the economy is in good shape despite the tighter monetary policy of recent years and all the geopolitical as well as domestic tensions. Overall, the economy is doing well.