But nothing is as simple as a two-dimensional stock chart would have you believe, so Big Business This Week editor Peter Green spoke with Mike Pedroni, CEO of Highland Global Advisors, and a former economist and economic adviser in the White House and at the Treasury Dept. We asked him what changes we might see with the Democrats in charge.

What can and should the Democrats do to fix the economy and improve the business climate for all Americans, when they take control of the Senate and the House in January?

I’ll get to the punchline first, which is, I don’t think Democrats will have enough levers to be able to change many things in these two years. Let me break that down a little bit. On things like tariffs, I don’t see the Democrats having any real ability to change what President Trump and the White House are currently doing. There may be a little more emphasis on repayment of the tariffs that the Supreme Court previously found to be inappropriately levied, and so I can see the Democrats putting some additional pressure to get those businesses who paid those emergency tariffs reimbursed. On broader tariff policy, I don’t think that the Democrats can or will change anything there. On inflation, the price of oil will remain closer to $100 per barrel than $60 until the conflict in Iran is solved. Even with control of both houses of Congress, Democrats don’t have great tools to force a settlement. They can try to pressure the Trump Administration through the War Powers Act and oversight hearings. While an end to the conflict in Iran could help to lower gasoline prices, Iran has learned that it can earn revenue through its control of the Strait of Hormuz, so don’t expect oil prices to come down much.

On other prices, I think this administration will continue to own that problem, and until we can get some control of the fiscal deficit and spending, it doesn’t look to me like in the next two years we’re going to see a rapid improvement in inflation. The third thing, which gets a little bit more wonky but is really important, is artificial intelligence legislation. There will be a lot of pressure to introduce legislation that would try to create some guardrails and a liability framework for artificial intelligence. And I could see the White House wanting to play ball there, so long as the guardrails are relatively light touch and the liability is relatively light touch, and so long as it doesn’t restrict the U.S. in its “arms race” on AI with China. AI is the one area where I think the Democrats will push for some kind of legislative and regulatory framework. And my personal view is that that’s a good outcome.

Let’s start with tariffs. Why not just try to cancel the whole tariff regime and take us back to the way things were at the end of 2024?

The DNA of the United States has changed in the last 20 years. There is no constituency that I see that will carry the flag of unfettered free trade, open markets, free capital flows. That world that I came up in during the Clinton years and the Bush and the Obama years, those were all administrations that were pushing for open markets and free trade.There is no longer a meaningful constituency on the Democratic side or the Republican side pushing for that, and that’s not winning any elections. So tariffs are here to stay. It is a tax on American citizens. Let’s be clear about that. And it’s a way to levy some tax that helps to defray our rapidly increasing national debt. My base case is that tariffs are generally not a good thing, but I don’t think all tariffs are bad. If you’re trying to protect critical industries, let’s say your pharmaceutical industry, or steel production industry for national security reasons, that’s a perfectly justifiable reason to levy a tariff. It’s the across the board tariffs that are really a transfer of wealth from American households to the U.S. government. Unfortunately, they’re here to stay.

Let’s talk about inflation. Obviously, the war in Iran that has created supply chain bottlenecks reminiscent of COVID, and an energy crisis. And since energy markets are global, if oil coming through the Straits is selling at $100 a barrel, ExxonMobil or somebody drilling in the Permian Basin, won’t let that cheaper oil hit the market at a lower price.

You’re spot on there. When you get some relief in the Strait of Hormuz, whatever form that will take, you could see, you should see oil prices come down a bit. However, I would say this: The war has taught the Iran regime that they can monetize their control of the Strait of Hormuz, so they will continue to do that for as long as they possibly can. All they have to do is attack a couple of container ships a week, and it creates enough uncertainty. Yes you should see oil prices coming down. If there can be an end to the war in Iran that somehow prevents Iran from continuing to exploit its control over the Strait of Hormuz. I am not bullish that we can find an end to the war, an acceptable end to the war in Iran, that would do that. That is one major driver of inflation. And it’s not just the price of the pump. It’s all of the secondary effects of higher costs of oil and diesel that basically power our economy. Even if we are able to get inflation under control through the oil price, through tighter monetary policy, restrained fiscal spending, which I don’t foresee us being able to do, prices aren’t going to go down. They’re at this high level permanently. And it’s just the rate of increase that could slow. Of course, once wages start to keep pace with price rises, that can cause a second round of inflation.

Is there a grand plan that the Democrats have or should have or could have to fix the economy at this point?

I do not think the Democrats have a grand plan at the moment. What you’re going to see in the next two years, will be auditioning for the party’s ability to run the country come 2028, because that’s the big prize, winning back the presidency. They are going to have to show an ability to have a proactive agenda that helps address this issue of wages of American workers not keeping pace with the price increases that they’re facing. If the Democrats spend a lot of time on things like impeachment and oversight and accountability hearings, it would be a misfire, because what they need to demonstrate is that they have a platform that appeals to a broad set of Americans. This [election] is a referendum on the Trump administration, which has not met its promises. The Trump administration promised that government spending would go down and that our deficit would be 3% [of GDP] per year. In fact, government spending is just as high as it was under the Biden administration.

Can the Democrats do anything to bring spending more in line with revenue and start chipping away at the $40 trillion federal debt?

Where the Democrats will have significant power is to not approve a debt ceiling [increase] until they get things that they want.

What about regulation and oversight of business and the economy? Are there ways where you could see the Democratic Party trying to install some kind of better oversight, strengthening SEC rules or all kinds of things that might protect consumers and improve the economy for individuals?

They will have the power of oversight. It is a powerful tool, not as powerful as primary legislation, but it’s a powerful tool. Oversight in its best form is a way to expose issues that could be reshaped and reformatted to achieve a better outcome for Americans. There’s a big push to allow retail investors through their 401(k)’s and other products to gain exposure to what we call private assets. With the proper guardrails around it, this is a good thing. If you’re 25 and saving for your retirement 50 years or 40 years later, you want some exposure to alternative or private assets that are not so correlated with the publicly traded stock markets. You’ll see some oversight hearings related to crypto and in particular, the Trump family’s involvement there. But in terms of the regulatory agenda writ large, the Democrats don’t really have a lot of tools there. I could see Trump himself embracing some populist policies on things like credit card fee caps, or protecting housing rights for individual homeowners. A big question among my clients right now—asset managers, financial services institutions—is whether a financial services tax could be in the offing. I tend to think no, and Trump would probably veto any kind of taxation there. But it’s not inconceivable that a “pay your fair share tax,” if it’s properly formatted in terms that Trump can sell, is not inconceivable. You could see horseshoe coalitions between the left wing of the Democratic Party and the populist wing of the Republican Party.

Do you see the Democrats moving to raise the national minimum wage to a living wage?

Anything like that can get vetoed by the president. So I don’t foresee Democrats succeeding at raising the minimum wage in the next two years. It would help the economy [because] prices of everything that workers are buying have gone up at the same time that workers’ wages have stagnated. Whatever we can do to help the lower rung of the K-shaped economy would be good for U.S. society and for social cohesion. You have seen over the last 20 years, an increasing return to the wealthy, relative to the returns that are going to salaries. In plain English, people at the top are doing really, really well in America. Most of the population, though, is in the middle and at the bottom, and is not doing so well. The big challenge for Democrats and Republicans over the next five years, let’s take it out of a political cycle, is to figure out how to help that lower rung of the K do better.

(This interview has been edited and condensed for clarity and brevity)

—Peter S. Green

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Big Businesses mentioned this week:

$CVS ( ▲ 0.44% ) , $NVDA ( ▼ 8.5% ) , $ORCL ( ▼ 6.8% ) , $TCEHY ( ▲ 3.17% ) , $SKYD ( ▼ 3.46% ) , $TSLA ( ▼ 11.33% ) , $SPCX ( ▼ 6.89% ) , $AAPL ( ▼ 1.1% ) , $BNB ( ▼ 3.09% ) , $KHC ( ▼ 0.83% ) , $VZ ( ▼ 0.09% ) , $TMUS ( ▲ 0.25% ) , $T ( ▼ 0.73% ) , $ECHO ( ▼ 8.4% ) , $ANT ( 0.0% ) , $GOOGL ( ▼ 1.65% ) , $CRWV ( ▼ 9.29% ) , $C ( ▼ 5.47% ) , $DG ( ▼ 1.55% ) , $ARMCO ( 0.0% )

The Usual Suspects

• Vertically challenged: It’s clearly no fun being under the microscope, even when you’re a healthcare company. CVS $CVS is splitting its 9,000 drugstores from pharmacy benefit manager Caremark and its health insurance giant, the former Aetna, which it bought in 2018. Rising health care costs and drug and care denials are putting pressure on healthcare giants as state and federal regulators and lawmakers increase their scrutiny of insurers, pharma chains and PBMs, which many patients, advocates and independent pharmacies blame for high drug and healthcare costs. The split will create two publicly traded companies by 2028, said CEO David Joyner. “The businesses are best served by splitting,” he said. “CVS Health is effectively acknowledging that bigger isn’t always better,” Arielle Trzcinski, an analyst at Forrester, told industry newsletter Healthcare Dive. Shares in CVS fell 12.56% on Wednesday and are down 15% in the past five years.
• Larry and David have some money woes (And Elon tries to help): Under pressure from his good friend Donald Trump to limit China’s access to advanced Nvidia $NVDA chips, Oracle $ORCL executive chairman Larry Ellison has cancelled a $7 billion contract for Asia data centers with Chinese tech giant Tencent $TCEHY. That’s likely to complicate Ellison’s $20 billion raise for Oracle, half in stocks and half in bonds, to fund its AI expansion. (Only last week, Oracle said $20 billion was the max it would raise for AI financing through 2030, as it figures cash flow will start financing growth in 2028.) Oracle shares are down 50% this year, and that’s hurting Ellison’s other marquee deal, son David’s $97 billion-plus acquisition of Warner Bros. Discovery with his mini-studio Skydance $SKYD. Ellison is one of the world’s largest debtors, with $58 billion of his stock in Oracle pledged against loans he’s sued to fund Skydance’s purchases of Paramount and Warner, plus shares in Tesla $TSLA, SpaceX $SPCX and other companies. Skydance shares are down 46% in the past year (and about 13%, and that’s a problem). As the Wall Street Journal’s Jonathan Weill argues in a near-forensic analysis, Skydance massively overpaid for Warner, and now Skydance has to show it can cut enough costs and generate enough cash to pay down the $57 billion in debt it took on to buy Warner (on top of about $30 billion in existing debt), or start selling its best assets, like HBO and the Warner Bros. library. Last week, Elon Musk reportedly took a $1 billion stake in Skydance. There’s little chance that stake will turn a profit, which raises another question: If the Ellisons can’t keep Skydance afloat, is Elon angling for a bigger slice of the pizza?
• Apple earns insulated from AI: Is Apple $AAPL the only tech stock not hit by AI woes? Well, almost. The AI buildout is hitting chip supplies, and in July, Apple raised the price of laptops and iPhones by $100 or more. On Monday it said the problem is still raging, as the competition for components is sending up prices. That’s in large part because Apple does not want to squeeze the profit margins that have made it one of the world’s best-ever performing stocks. Revenue and profit rose nearly 12% in the most recent quarter from a year earlier, beating analyst estimates, but the chip price warning sent its shares down 4% the same day. They recovered quickly, and Apple is back up about 1% for the week, and 30% in the past year. Apple’s decision not to go all in on AI data centers has left its stock pretty much unscathed by the AI turmoil, that saw Intel, for instance, drop more than 20% last week in after-hours trading on news that chip components are getting pricier, and has seen Anthropic scale back its valuation by 25% ahead of a forthcoming IPO.
• Binance woes: Never, ever apply for a new job from your work computer. It turns out that North Korea’s $6.4 billion hack of crypto platform Binance $BNB started with a North Korean hacker group known as TraderTraitor using LinkedIn to target a Binance engineer, lure him with a fake job offer and a series of interviews before getting him to take a test on his work station. The test he downloaded carried a sophisticated bug that let the North Koreans into Binance’s inner workings. Binance says it’s been able to make its accountholders whole. It’s a setback for Binance founder and controlling shareholder, Changpeng Zhao, who’s reportedly the richest man in Cryptoland, worth an estimated $114 billion (pre-hack) and lives in Abu Dhabi. Zhao spent four months in a federal prison for failing to put in controls to block Russian money launderers, Iranian sanctions busters and Islamic State terrorists running money through the platform, before President Trump pardoned him. When Binance re-opened Sunday it reported another $3.64 billion of crypto left the platform, as wallet holders look for a safer vault. That’s just 2%-3% of Binance’s total customer assets, which are between $150 and $170 billion. Last week, unknown hackers took a mere $2.6 million from accounts on prediction market Polymarket, exploiting a security flaw in a third-party performance monitoring tool, the Journal reported.
• Maxwell gets evicted from the House: Kraft Heinz $KHC says it’s dumping the last drop of Maxwell House, after it agreed to sell 70% of its coffee business to PE firm One Rock Capital partners. Other brands in the deal include hi-end bean brand Gevalia and America’s blandest decaf, Sanka. The brands are worth a collective $650 million and Kraft will get about $500 million after taxes to pay down debt. It’s all part of new CEO Steve Cahillane plan to drop failing brands and beef up performance at legendary food lines including Oscar Mayer, Philadelphia Cream Cheese and Heiz ketchup. Shares in Kraft Heinz have fallen 33% in the past five years, but are up 16% in the past month.

Elon’s World

• Loser, loser, double-loser. Not good days for Elon Musk, who just spent some $445 million supporting Republican candidates in the mid-term and gubernatorial elections, only to see his hopes drowned in the Blue Tsunami. His new home state, Texas, where he moved his operations from California to benefit from a pro-MAGA administration, will have a Democratic governor and senator, and more Dems in its Congressional delegation come January. Musk spent more than $270 million to support Trump in the 2024 presidential election, and has gone on to win more than $90 billion in federal contracts for SpaceX $SPCX. He also holds the kill switch for his Starlink satellites that provide military intel and command and control capability to U.S. and allied armies.
• Double loser, Part 2: The election seems to have put a damper on hopes of merging Tesla with SpaceX, and on Thursday morning, shares in Tesla $TSLA were down 11% since the first returns were posted on Tuesday evening. Tesla shares are down 25% in the past year. Space X has dropped 8.1% since Tuesday night and is down 21% in the past year. Despite all the turmoil in Muskville, SpaceX is forging ahead with its plan to become a global mobile phone service provider, just not maybe in space, after all. SpaceX and Qualcomm $QCOM said Wednesday they’ve reached an agreement to provide Qualcomm chips for SpaceX’s Starlink Mobile service by building a terrestrial network to compete with the U.S.’s Big Three: Verizon $VZ, T-Mobile $TMUS and AT&T $T. Qualcomm said the Earthbound network will “complement Starlink’s satellite capabilities.” The deal follows news that SpaceX is in talks with EchoStar $ECHO to acquire its BoostMobile network. Before you can reach for the heavens, it seems, you must stand on your own two feet.

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The Circularity

• Anthropic’s banana peel: Institutional investors worried about the recent drop in tech stock prices say they are cutting their valuation of Anthropic $ANT by about 25% to $1.5 trillion when it IPOs later this year. Alphabet $GOOGL took a 13% hit last week, on falling net income, neocloud Coreweave $CRWV is down 40% in a month, and the S&P is down nearly 4% in a month. Not the kind of high growth that attracts a lot of interest in the sector. Anthropic is likely to do well at that reduced valuation, raising between $50 to $100 billion to pay for growth and service its $80-billion debt. Apollo Capital Management, one of the largest private lenders to the AI boom, has now loaned more than $350 billion in the past 12 months, with $114 billion in the third quarter alone, much of it to AI firms, rivaling commercial banks like Citi $C. The money comes from the premiums held by its insurance arm, Athene, and highlights the risk of sudden drops in the value of AI stocks.
• Jensen reacts: Just days after the New York Times reported that Nvidia $NVDA CEO Jensen Huang had been targeted by an alleged Chinese spy, The FT reported that Nvidia has been aware of a Chinese threat to its technology and has been telling its data center customers they must reduce the amount of compute they make available to Chinese firms. The fear is that Chinese access could eventually undermine the U.S. edge in chips and AI infrastructure, according to Nvidia. But one data center firm told the FT that it’s hard to find enough non-Chinese clients outside the U.S.
• A job’s a job, and then some: Specialist AI engineers working in client offices are getting paychecks from $586,000 to as high as $1.45 million a year, according to a survey by executive placement firm Christian & Timbers, with half to two-thirds of that in equity or bonuses. With only about 2,000 so-called elite forward deployed engineers in the U.S., businesses, tech companies and consulting firms are battling for the talent pool, and large tech firms are now pledging to train more of the engineers.
• Data Center washout: That blue Tsunami may also wipe out a lot of planned data centers, as voters across the country passed several dozen referenda banning or slowing the data center buildout. Many were tied to environmental issues, including air pollution from power sources and water consumption in drier areas. During her successful campaign, Texas governor-elect Gina Hinojosa said her state had become a “wild West” for data center construction. “It stops when I’m governor,” she said, and promised to craft comprehensive regulations for new data centers.

The Short Stack

• The New Cold War? That may be the explanation for a series of hacks of commercial refrigerators exposing the vulnerability of aging commercial machinery that simply fell off the radar of corporate cyber security officials. The first sign came in May, when an Israeli food processor saw its printers run haywire and its freezers catch fire. Investigators blamed Iranian military hackers Cyber Isnaad Front. Then came the U.S. Army commissaries abroad, French supermarket chain Intermarche which saw 150 stores hit by a freezer outage, and this week, scores of supermarkets were hit across Europe. Many of the affected fridges were made by Danish firm Danfoss, which had stopped updating software years ago. But the hacks illustrate how tough it will be to secure the vast Internet of Things.
• A fistful at Dollar General: Looks like discount grocer Dollar General $DG got caught with its hand in the pockets of its customers. The Federal Trade Commission and 20 states are suing Dollar General for what they call “Long-running deceptive pricing practices,” that cost customers millions of dollars. Regulators received more than 29,000 customer complaints that shelf prices didn’t add up to what was charged at the register in stores in all 48 states where the company operates. Dollar general conceded that “occasional price discrepancies can occur,” but the suit says that “despite being made aware of the problem, Dollar General has failed to implement policies and practices to adequately address the problem.” Shares in Dollar General are up 15% in the past month.
• War Story: Are Democrats good for energy prices? Brent Crude, a benchmark for oil leaving the Persian Gulf, dropped about $5 to near $97 a barrel from Tuesday evening through midday Thursday, suggesting traders are no longer worried that president Trump will drop another bomb on Iran, something he’d hinted at in the days before Tuesday’s elections. That may have been helped by Trump’s comments that he’ll end military aid to Israel, the US partner in the war on Iran. Still, energy prices are unlikely to drop significantly, because there’s no way to guarantee the Strait of Hormuz will stay open to shipping (see the Q&A above). So gas at Thursday’s $4.10 a gallon (about 25 cents more at my local pump) and diesel at $6.25 are likely to stay with us. That’s bad news for American households, which have paid about $1,100 dollars extra for energy so far this year, according to the Brown University Climate Solutions Lab. Among the hardest-hit victims? Small trucking companies. With diesel up 70% from a year ago, they are going bankrupt at record rates,the New York Times reports, with 40 going bust in September, up 38% from last year. But it sure has been good times for oil companies. Saudi Aramco, $ARMCO the state-owned Saudi oil giant said this week adjusted net income rose 9% in the third quarter from a year earlier,when there was no war, to $31.2 billion. A New York Times survey found that 50 large U.S. oil and gas companies made more than $130 billion in profits from April through September compared with $47 billion in the same period a year earlier. That’s about $83 billion in extra profits. President Trump’s reaction at a rally last weekend? “We’re making a freaking fortune.”