The biggest trading theme of 2026: "Unlosable" Trump, the end of the international order

Author: Xu Chao, Wall Street Insights

As we enter 2026, the global macro markets are undergoing a profound paradigm shift. Senior analyst David Woo believes that in the face of immense pressure from midterm elections, the Trump administration is demonstrating a determination to turn the situation around at all costs, which will reshape the global asset pricing logic from energy to gold.

David Woo states that to compensate for severe polling disadvantages and avoid losing the 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 in 2026 will shift from pure re-inflation to aggressive deflation measures—especially by tightly controlling energy resources to significantly lower oil prices, with the goal of bringing gasoline prices below key psychological thresholds before the election. This strategy aims not only to suppress inflation but also to stabilize votes by improving middle-class living costs.

Furthermore, Trump’s previous actions against Venezuela mark the de facto end of the post-war rules-based international order. This move is not driven by ideological considerations but by a desire to directly control energy resources (which account for 18% of global proven reserves) to increase supply and suppress global oil prices.

The goal is to lower U.S. gasoline prices to around $2.25 per gallon before September or October.

For the market, one of the core trades in 2026 will be shorting crude oil.

David Woo predicts that oil prices could fall to the high range of $50 or even $40 by the end of the year. This geopolitical move will make OPEC the biggest loser, significantly weakening its market control, while oil-importing countries like India and Japan will benefit.

The Unwinnable Midterm Elections

David Woo analyzes that the biggest backdrop for the 2026 macro narrative is the midterm elections. Although Trump controlled market trends in 2025, his current approval rating hovers around 40%, facing a roughly 20 percentage point deficit compared to historical norms. For Trump, if the Republicans lose control of Congress in November, his second term will fall into an endless nightmare of subpoenas and impeachment.

Therefore, the political theme for 2026 is “throw the kitchen sink at it.”

White House Chief of Staff Susie Wiles has explicitly stated that Trump’s campaign efforts in 2026 will be on par with those in the 2024 election year. This political survival pressure will directly influence U.S. economic and diplomatic decisions, forcing the government to adopt unconventional measures to please voters, with the most central being addressing the cost of living crisis.

A new structural bull market. Meanwhile, the market should be alert to upcoming large-scale fiscal stimulus, as it is expected that Trump will use tariff revenue to distribute cash checks to middle- and low-income groups, which will put upward pressure on long-term U.S. Treasury yields and fundamentally change the macro liquidity environment of 2026.

New Energy Strategy: The Political Cost of Lowering Oil Prices

To win the “affordability” debate, the quickest and most direct method for the Trump administration is to lower oil prices. David Woo states that recent U.S. actions against Venezuela are not driven by ideological export but by a desire to directly control the country’s oil resources (which account for 18% of global proven reserves), thereby increasing supply and suppressing global oil prices.

The goal is to bring U.S. gasoline prices to around $2.25 per gallon before September or October.

For the market, one of the core trades in 2026 will be shorting crude oil.

David Woo predicts that oil prices could drop to the high $50s or even $40s by year-end. This geopolitical move will make OPEC the biggest loser, significantly weakening its market control, while oil-importing countries like India and Japan will benefit.

Tariff Refunds and the Reversal of the K-shaped Economy

In addition to lowering oil prices, another potential major move is large-scale fiscal stimulus. David Woo predicts a 65% probability that Trump will introduce a new round of stimulus before the midterm elections. The specific approach is to use the massive tariff revenues collected last year to issue $2,000 “tariff rebate” checks to Americans earning less than $75,000 annually.

To ensure passage in Congress, Trump may bundle this rebate plan with extensions of Obamacare subsidies favored by Democrats and bypass Senate opposition through a reconciliation bill. This strategy aims to turn the victims of the tariff war (consumers) into beneficiaries, achieving a “win-win” both geopolitically and domestically.

This targeted stimulus for middle- and low-income groups, combined with increased disposable income from lower oil prices, will benefit retail giants serving mass consumption (Consumer Staples) and may reverse the current market consensus of a “K-shaped” recovery, where only the wealthy benefit.

The End of the International Order and the Gold Bull Market

The aggressive geopolitical measures taken by the U.S. to control oil prices send a clear signal worldwide: The rules-based international order has ended. David Woo believes that when the world’s most powerful country decides to act solely based on strength rather than rules, the international system that protected small nations no longer exists.

This shift has profound implications for asset allocation:

Short emerging market stocks: In the absence of a rules-based order, small countries face higher geopolitical risks, and traditional “convergence trade” logic fails.

Long defense sectors: Security anxieties will force countries to significantly increase defense spending.

Long gold: As the U.S. no longer acts as a benevolent guarantor of the international order, the credit foundation of the dollar as a reserve currency erodes. Against the backdrop of expanding deficits and rising geopolitical realism, gold will become a key asset to hedge against disorder—even if the dollar does not collapse, gold still has over 10% upside.

The Biggest Risks: Stock Market and AI Bubble

Although Trump attempts to rally voters through social policies, the stock market remains his “Achilles’ heel.”

David Woo warns that U.S. equities are currently approaching internet bubble valuations, and capital gains taxes are a significant source of federal revenue. A 20%-30% decline in stocks could trigger a recession and sharply worsen the fiscal deficit.

The greatest current market risk is the burst of the AI bubble. Wall Street generally expects AI-related capital expenditures to grow another 50% in 2026, but increasing competition among models, hardware bottlenecks, and future return rate concerns are making this consensus fragile. If tech giants like Microsoft show any signs of slowing growth in their earnings reports, and retail investors stop buying the dip, the market could face a sharp correction, threatening Trump’s re-election plans.