2026 Top Transaction Themes: Trump's Sore Loser, End of the International Order
Original Article Title: "The Biggest Trading Theme of 2026: Trump Can't Afford to Lose, End of the International Order"
Original Article Author: Xu Chao, Wall Street News
Entering 2026, the global macro market is undergoing a profound paradigm shift. Senior analyst David Woo believes that facing immense pressure from the midterm elections, the Trump administration is demonstrating a determination to reverse the situation at all costs, reshaping the global asset pricing logic from energy to gold.
David Woo stated that to offset a significant polling disadvantage and avoid losing majority seats in Congress, the policy focus of the Trump administration has shifted entirely towards winning the "affordability" debate. This means that the ultimate trading theme of 2026 will transition from mere reflation to aggressive deflationary measures—especially through tight control of energy resources to significantly lower oil prices, with the goal of reducing gasoline prices to a key psychological defense line before the election. This strategy aims not only to suppress inflation but also to stabilize voter support by improving the cost of living for the middle class.
Trump's previous actions towards Venezuela mark the substantive end of the rule-based international order established after World War II. This move is not driven by ideological considerations but rather by a direct control of energy resources, with the aim of securing a domestic "affordability argument" through significantly increased supply. Trump's goal is to drive gasoline prices down to $2.25 per gallon before the fall, which will severely impact the oil market, with oil prices expected to fall to the range of $40 to $50.
Woo warned that as the U.S. abandons its traditional role as a guarantor of the international system, global geopolitical insecurity will sharply rise, providing strong support for gold and benefiting the defense industry. In contrast, emerging market stocks will face the risk of revaluation, as in an era of power politics resurgence, the security premium of small economies will no longer exist.
The Stakes of the Midterm Elections
David Woo's analysis points out that the biggest backdrop of the 2026 macro narrative is the midterm elections. Although Trump controlled the market trends in 2025, his approval rating is currently hovering around 40%, facing a huge deficit of about 20 percentage points compared to historical norms. For Trump, if the Republicans lose control of Congress in November, his second term will be plunged into an endless nightmare of subpoenas and impeachments.
Therefore, the political theme of 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 the 2024 election year. This political survival pressure will directly shape U.S. economic and diplomatic decisions, forcing the government to take unconventional measures to please voters, with the key focus being addressing the cost of living crisis.
A New Structural Bull Market. At the same time, the market needs to be wary of the upcoming massive fiscal stimulus. It is expected that Trump will use tariff revenue to provide cash payments to the middle and low-income groups, which will create new upward pressure on U.S. long-term bond yields, fundamentally altering the macro liquidity environment in 2026.
New Energy Strategy: The Political Ledger 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 suggests that the recent U.S. actions against Venezuela are fundamentally motivated not by ideological exportation but by the direct control of the country's oil resources (which represent 18% of global 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 oil.
David Woo predicts that oil prices could fall to a high range of $50 or even $40 per barrel 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.
Tariff Rebates and the Reversal of K-Shaped Economy
In addition to lowering oil prices, another potential significant measure is a massive fiscal stimulus. David Woo predicts a 65% probability that Trump will roll out a new round of stimulus before the midterm elections. The specific approach is to use the substantial tariff revenue collected last year to distribute a "tariff rebate" check of $2,000 per person to Americans earning less than $75,000 a year.
To ensure the bill passes through Congress, Trump may tie this rebate plan to an extension of Obamacare subsidies that Democrats care about and navigate through a Reconciliation Bill to bypass Senate obstruction. This strategy aims to transform the victims of the tariff war (consumers) into beneficiaries, achieving a "win-win" situation in geopolitics and domestic economy.
This targeted stimulus for the middle and lower income groups, combined with the increase in disposable income due to low oil prices, will benefit retailers serving mass consumer staples and may reverse the current market consensus on a "K-shaped economic" recovery, where only the wealthy are seen to benefit.
The End of the International Order and the Gold Bull Market
The aggressive geopolitical measures taken by the United States to control oil prices have sent a clear signal to the world: the rule-based international order has come to an end. David Woo believes that when the world's most powerful country decides to act based on strength rather than rules, the international system that used to protect the interests of smaller nations ceases to exist.
This shift has profound implications for asset allocation:
Shorting emerging market stocks: In the new order lacking rule-based protection, smaller nations face higher geopolitical risks, rendering the traditional "convergence trade" logic ineffective. Long defense sectors: Security concerns will compel countries to significantly increase defense spending. Long gold: With the U.S. no longer serving as the benevolent guarantor of the international order, the credit foundation of the U.S. dollar as a reserve currency is being eroded. Against the backdrop of expanding deficits and rising geopolitical realism, gold will become a key asset for hedging against a disorderly world. Even in the absence of a U.S. dollar collapse, gold still has over 10% upside potential.
The Biggest Risk: Stock Market and the AI Bubble
Despite Trump's attempts to win over voters through populist policies, the stock market remains his "Achilles' heel."
David Woo warns that the current high valuation of U.S. stocks is approaching the levels seen during the dot-com bubble, and capital gains tax is a key source of federal revenue growth. A 20%-30% stock market decline would not only trigger an economic recession but also sharply worsen the fiscal deficit.
The biggest current risk in the market is the bursting of the AI bubble. Wall Street generally expects a further 50% increase in AI-related capital expenditures by 2026, but intensifying model competition, hardware bottlenecks, and issues with future returns are making this consensus fragile. If tech giants (such as Microsoft) show any signs of slowing growth in their financial reports and retail investors stop buying the dip, the market could face a severe correction, threatening Trump's reelection plans.
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