The biggest trading theme of 2026: Trump cannot afford to lose, the end of the international order

# By Xu Chao

Entering 2026, the global macro market is undergoing a profound paradigm shift. Senior analyst David Woo argues that facing immense pressure from the midterm elections, the Trump administration is demonstrating a resolve to turn the tide at all costs, which will reshape the pricing logic of global assets ranging from energy to gold.

David Woo stated that to make up for its severe polling deficit and avoid losing its majority in Congress, the policy focus of the Trump administration has fully shifted to winning the "affordability" debate. This means that the ultimate trading theme for 2026 will shift from simple reflation to aggressive deflationary measures—especially through the strong control of energy resources to drastically lower oil prices, with the goal of reducing gasoline prices to a key psychological threshold before the general election. This strategy is not only intended to curb inflation, but also to consolidate votes by improving the cost of living for the middle class.

Trump’s previous actions against Venezuela mark the substantive end of the rules-based international order established after the war. This move is not driven by ideological considerations, but rather to directly control energy resources, with the aim of winning the domestic "affordability argument" by substantially increasing supply. Trump’s target is to push gasoline prices down to $2.25 per gallon by autumn, which will deal a severe blow to the crude oil market, and oil prices are expected to drop to the $40–$50 range.

Woo warned that as the United States abandons its role as the traditional guarantor of the international system, global geopolitical insecurity will rise sharply, providing strong support for gold and benefiting the defense industry. Conversely, emerging market equities will face the risk of valuation re-rating, because in an era where power politics has returned, the safety premium for small economies will no longer exist.

## The Midterm Elections That Cannot Be Lost

David Woo analyzed that the biggest backdrop for the macro narrative in 2026 is the midterm elections. Although Trump dominated market trends in 2025, his approval rating currently hovers around 40%, facing a huge deficit of about 20 percentage points compared with historical patterns. For Trump, if the Republican Party loses control of Congress in November, his second term will be mired in an endless nightmare of subpoenas and impeachment.

Therefore, the political theme for 2026 is "throw the kitchen sink".

White House Chief of Staff Susie Wiles has made it clear that Trump’s campaign efforts in 2026 will be equivalent to those in the 2024 general election year. This political survival pressure will directly dominate U.S. economic and foreign policy decisions, forcing the government to take unconventional measures to please voters, with the core focus being solving the cost-of-living crisis.

A new structural bull market is emerging. Meanwhile, the market needs to be wary of the upcoming large-scale fiscal stimulus. It is expected that Trump will use tariff revenues to issue cash checks to middle- and low-income groups, which will put new upward pressure on long-term U.S. Treasury yields and completely change the macro liquidity environment in 2026.

## New Energy Strategy: The Political Arithmetic of Lowering Oil Prices

To win the "affordability" debate, the fastest and most direct means for the Trump administration is to lower oil prices. David Woo said that the fundamental motivation behind the U.S.’s recent actions against Venezuela is not ideological export, but to directly control the country’s oil resources (accounting for 18% of the world’s proven reserves), thereby increasing supply and suppressing global oil prices.

The goal of this strategy is to reduce U.S. gasoline prices to around $2.25 per gallon by September or October.

For the market, this means that one of the core trades in 2026 is to short crude oil.

David Woo predicts that crude oil prices may fall to the high end of the $50 or even $40 range by the end of the year. This geopolitical move will make OPEC the biggest loser, as its market control will be greatly weakened, while oil-importing countries such as India and Japan will benefit from it.

## Tariff Rebates and the Reversal of the K-shaped Economy

In addition to lowering oil prices, another potential major measure is large-scale fiscal stimulus. David Woo predicts a 65% probability that Trump will launch a new round of stimulus plans before the midterm elections. The specific approach is to use the huge tariff revenues collected last year to issue $2,000 "tariff rebate" checks to Americans with annual incomes below $75,000.

To ensure the bill’s passage in Congress, Trump may bundle this rebate plan with the extension of Obamacare subsidies, a key concern of the Democratic Party, and bypass the Senate filibuster through a Reconciliation Bill. This strategy aims to turn the victims of the tariff war (consumers) into beneficiaries, thereby achieving a "win-win" situation in both geopolitics and the domestic economy.

This targeted stimulus for middle- and low-income groups, combined with the increased disposable income brought by low oil prices, will benefit retailers catering to mass consumption (Consumer Staples), and may reverse the current market consensus on a "K-shaped economic" recovery—meaning the situation where only the wealthy benefit could change.

## The End of the International Order and the Gold Bull Market

The radical geopolitical measures taken by the United States to control oil prices send a clear signal to the world: the rules-based international order has ended. David Woo believes that when the world’s most powerful country decides to act based solely on strength rather than rules, the international system that once protected the interests of small countries will cease to exist.

This shift has far-reaching implications for asset allocation:

- **Short emerging market equities**: In the new order lacking rule-based protection, small countries face higher geopolitical risks, and the traditional logic of "convergence trades" fails.

- **Long the defense sector**: Security anxiety will force countries to significantly increase defense spending.

- **Long gold**: As the United States no longer acts as a benevolent guarantor of the international order, the credit foundation of the U.S. dollar as a reserve currency is eroded. Against the backdrop of expanding deficits and the rise of geopolitical realism, gold will become a key asset to hedge against an unruly world. Even if the U.S. dollar does not collapse, gold still has more than 10% upside potential.

## The Biggest Risk: Stock Market and AI Bubble

Although Trump is trying to win over voters through livelihood policies, the stock market remains his "Achilles’ heel".

David Woo warned that the current high valuation of U.S. stocks is close to the level seen during the dot-com bubble, and capital gains tax is an important source of federal tax revenue growth. If the stock market falls by 20%–30%, it will not only trigger an economic recession, but also lead to a sharp deterioration in the fiscal deficit.

The biggest risk facing the market currently is the bursting of the AI bubble. Wall Street generally expects AI-related capital expenditure to grow by another 50% in 2026, but intensifying model competition, hardware bottlenecks, and future return on investment issues are making this consensus fragile. If the earnings reports of tech giants (such as Microsoft) show any signs of slowing growth, and retail investors stop buying the dip, the market may face a sharp correction, which in turn threatens Trump’s re-election plan.

### Disclaimer

The market is risky and investment requires caution. This article does not constitute investment advice. Users should consider whether any opinions, views, or conclusions in this article are in line with their specific circumstances. Investment decisions made based on this article shall be at the user’s own risk.