The biggest trading theme of 2026: Trump can't afford to lose, the end of the international order
TechFlow Selected TechFlow Selected
The biggest trading theme of 2026: Trump can't afford to lose, the end of the international order
Facing immense pressure from the midterm elections, the Trump administration is showing determination to turn the situation around at all costs.
Navigating Web3 tides with focused insightsBy Xu Chao
As the world enters 2026, global macro markets are undergoing a profound paradigm shift. Senior analyst David Woo believes that under immense pressure from the midterm elections, the Trump administration is demonstrating a determination to reverse its fortunes at all costs—reshaping the global asset pricing logic from energy to gold.
Woo notes that to close a significant polling gap and avoid losing its congressional majority, the Trump administration has fully shifted its policy focus toward winning the "affordability" debate. This means the dominant market theme of 2026 will move beyond simple reflation to embrace aggressive deflationary measures—particularly through forceful control of energy resources to sharply lower oil prices, aiming to bring gasoline prices down to a critical psychological threshold before election day. This strategy is not only intended to tame inflation but also to stabilize voter support by reducing the cost of living for middle-class Americans.
Trump’s prior actions toward Venezuela mark the de facto end of the rules-based international order established after World War II. This move was not ideologically driven but rather aimed at directly securing energy resources, increasing supply to win the domestic affordability argument. The goal is to reduce U.S. gasoline prices to $2.25 per gallon before autumn—an action that would send shockwaves through crude markets, potentially driving oil prices into the $40–$50 range.
Woo warns that as the U.S. abandons its traditional role as guarantor of the international system, global geopolitical insecurity will surge, providing strong tailwinds for gold and defense industries. In contrast, emerging market equities face valuation repricing risks, as small economies will no longer enjoy security premiums in an era defined by power politics.
An Election They Can’t Afford to Lose
David Woo emphasizes that the overarching macro backdrop for 2026 is the midterm election. Although Trump dominated market dynamics in 2025, his approval rating currently hovers around 40%, lagging historical norms by roughly 20 percentage points. For Trump, losing control of Congress in November would mean his second term would be consumed by subpoenas and impeachment threats.
Therefore, the political mantra for 2026 is “throw the kitchen sink.”
White House Chief of Staff Susie Wiles has made it clear that Trump’s campaign intensity in 2026 will match that of the 2024 presidential election year. This existential political pressure will directly shape U.S. economic and foreign policy decisions, compelling the government to adopt unconventional measures to appease voters—with tackling the cost-of-living crisis as the centerpiece.
A new structural bull market may emerge. Meanwhile, markets should brace for large-scale fiscal stimulus: Trump is expected to use tariff revenues to issue cash checks to low- and middle-income households, which would exert fresh upward pressure on long-end Treasury yields and fundamentally alter the macro liquidity environment in 2026.
New Energy Strategy: The Politics of Lowering Oil Prices
To win the affordability debate, the fastest and most direct lever for the Trump administration is lowering oil prices. According to David Woo, the recent U.S. moves against Venezuela are not about ideological export but about gaining direct access to the country’s vast oil reserves (accounting for 18% of global proven reserves) to boost supply and suppress global oil prices.
The objective is to bring U.S. gasoline prices down to approximately $2.25 per gallon by September or October.
For financial markets, this implies one of the core trades of 2026 will be shorting crude oil.
Woo forecasts crude prices could fall to the high $50s—or even $40—by year-end. This geopolitical maneuver would make OPEC the biggest loser, significantly undermining its market influence, while oil-importing nations like India and Japan stand to benefit.
Tariff Rebates and Reversing the K-Shaped Economy
Beyond lowering oil prices, another potential major initiative is large-scale fiscal stimulus. Woo estimates a 65% probability that Trump will roll out a new stimulus package ahead of the midterms. The mechanism would involve using last year’s substantial tariff revenues to issue $2,000 “tariff rebate” checks to Americans earning under $75,000 annually.
To ensure passage in Congress, Trump might bundle this rebate program with Democratic priorities such as extending Obamacare subsidies, using reconciliation procedures to bypass Senate filibusters. The strategy aims to transform consumers—previously seen as victims of the tariff war—into beneficiaries, achieving a “win-win” outcome both geopolitically and domestically.
This targeted stimulus for low- and middle-income households, combined with increased disposable income from lower fuel prices, would benefit consumer staples retailers and could overturn the current market consensus on a “K-shaped” recovery—one where only the wealthy benefit—potentially rebalancing economic gains across classes.
The End of the International Order and the Gold Bull Market
The aggressive geopolitical tactics used by the U.S. to control oil prices send a clear signal globally: the rules-based international order is over. Woo argues that when the world’s most powerful nation chooses to act based on strength rather than rules, the international system that once protected smaller nations collapses.
This transformation has far-reaching implications for asset allocation:
Short emerging market equities: In a rule-free new order, smaller nations face heightened geopolitical risks, rendering the traditional “convergence trade” obsolete.
Long defense sector: Rising security anxieties will compel countries to significantly increase defense spending.
Long gold: As the U.S. ceases to serve as a benevolent enforcer of global order, the credibility of the dollar as a reserve currency erodes. Amid widening deficits and the rise of geopolitical realism, gold will become a key hedge against a chaotic world. Even without a dollar collapse, gold has upside potential of more than 10%.
The Biggest Risk: Stock Market and AI Bubble
Despite efforts to win public favor through populist policies, the stock market remains Trump’s Achilles’ heel.
David Woo warns that current U.S. equity valuations are approaching levels seen during the dot-com bubble, and capital gains taxes are a crucial source of federal revenue growth. A 20–30% drop in stock prices would not only trigger a recession but also drastically worsen the fiscal deficit.
The greatest market risk lies in the bursting of the AI bubble. Wall Street widely expects AI-related capital expenditures to grow another 50% in 2026, but intensifying model competition, hardware bottlenecks, and uncertain future returns are making this consensus increasingly fragile. If tech giants (e.g., Microsoft) report any signs of slowing growth and retail investors stop buying the dip, markets could face a sharp correction—jeopardizing Trump’s re-election prospects.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
