Trump intensifies actions for the midterm elections, US stocks face "unsolvable" policy risks in 2026

The U.S. stock market in 2026 is facing a new core risk: the political cycle. According to the latest news, Ed Clissold, Chief U.S. Strategist at Ned Davis Research, has introduced a new concept—the “Big MAC Trade” (Midterm Election Battle Ahead)—to describe the systemic impact of policy shifts before and after this fall’s congressional elections on the stock market. Trump is ramping up efforts for the November elections, with a series of policy adjustments targeting public welfare causing waves in the market.

Trump’s Election Campaign Policy Portfolio

At the beginning of the year, Trump launched multiple policy statements intensively, with the core goal of boosting the Republican Party’s chances in the November elections. These policies focus on the hotly debated U.S. “affordability of living” issue, but the market reaction has been quite intense.

Policies that have already impacted the market

• Requiring credit card issuers to set interest rate caps at 10%, which is less than half the current average interest rate. Once announced, bank stocks plummeted.
• Ordering defense contractors to suspend dividend payments and reinvest funds into production, leading to a heavy hit on the defense sector.
• Attacking the Federal Reserve’s independence, triggering widespread panic on Wall Street Monday.

The logic behind these policies is clear: short-term “pro-populist” measures to accumulate political capital, but at the cost of damaging profitability in certain industries.

The dilemma facing the market

Clissold pointed out the key issue in his report: “Before the midterm elections, policy adjustments targeting specific industries will become a major risk, and the market currently lacks clarity on how to hedge against such risks.”

This is the core problem—this is not a traditional economic cycle fluctuation, nor purely policy adjustments, but a systemic policy shock driven by the political cycle. Investors cannot rely on traditional hedging tools to manage this risk.

The Extended Impact of Policy Fluctuations

According to related reports, the influence of Trump’s policies extends far beyond the financial sector.

Challenges to Federal Reserve Independence

Fed Chair Jerome Powell stated he is facing a criminal investigation, which he attributes to his refusal to meet Trump’s calls for rate cuts. This reflects direct pressure from the Trump administration on Fed decision-making, and such interference is itself a major source of market uncertainty.

Policy dilemmas in cryptocurrency regulation

Charles Hoskinson, founder of Cardano, criticized White House crypto affairs chief David Sacks, calling for Sacks to resign if key crypto market structure legislation fails to pass in the first quarter. This reveals the crypto industry’s anxiety over policy progress and also highlights internal difficulties within government agencies in executing policies.

Geopolitical and trade policy uncertainties

Trump reaffirmed his stance on Greenland and advanced trade negotiations with India. These moves increase uncertainty in international trade and diplomatic relations, thereby affecting the pricing of risk assets.

Policy Risk Outlook for 2026

From now until the November elections, the market may face ongoing policy volatility. To maximize electoral success, Trump is expected to continue rolling out targeted policies aimed at specific industries or public concerns. Each policy could become a market disturbance.

Key points to watch include:

• Whether Trump will continue to implement targeted policies on key sectors like finance, energy, and technology
• Whether the Federal Reserve can maintain its independence under political pressure
• Whether regulatory frameworks for emerging fields like cryptocurrency will be established before the elections
• Whether changes in international trade relations will escalate into systemic risks

Summary

The greatest risk facing the U.S. stock market in 2026 is not economic fundamentals but policy uncertainty driven by the political cycle. The policy portfolio Trump is deploying for the midterm elections has already begun to impact the market, with pressure felt across bank stocks and the defense sector. A deeper issue is that the market lacks effective hedging tools to manage such political risks.

Investors need to adapt to a new reality: policy volatility will become the norm rather than the exception in the run-up to elections. Monitoring political developments and policy signals may be more important than traditional economic data analysis.