By: Xu Chao
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, which will reshape the global asset pricing logic from energy to gold.
David Woo stated that to compensate for a severe polling deficit and avoid losing its majority in Congress, the Trump administration's policy focus has fully shifted to winning the "affordability" debate. This means the ultimate trading theme of 2026 will shift from simple reflation to aggressive deflationary measures—particularly by forcefully controlling energy resources to drastically lower oil prices, aiming to bring gasoline prices below a key psychological threshold before the election. This strategy aims not only to curb inflation but also to secure votes by improving the cost of living for the middle class.
Trump's recent actions regarding Venezuela mark the substantive end of the post-war rules-based international order. This move is not driven by ideological considerations but by the desire to directly control energy resources, hoping to win the domestic "affordability argument" by significantly increasing supply. Trump's goal is to push gasoline prices down to $2.25 per gallon by the fall, which will cause severe shocks to the crude oil market, with prices expected to fall to the $40 to $50 range.
Woo warns that as the U.S. abandons its traditional role as guarantor of the international system, global geopolitical insecurity will rise sharply, providing strong support for gold and benefiting the defense industry. Conversely, emerging market stocks will face valuation reassessment risks, as the safety premium for smaller economies will vanish in an era of returning power politics.
The Midterm Election He Can't Afford to Lose
David Woo's analysis points out that the biggest backdrop for the 2026 macro narrative is the midterm elections. Although Trump dominated market trends in 2025, his approval rating currently hovers around only 40%, representing a massive deficit of about 20 percentage points compared to historical patterns. For Trump, if the Republican Party loses control of Congress in November, his second term will descend into 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 clearly stated that Trump's campaign intensity in 2026 will be equivalent to that of the 2024 presidential election year. This political survival pressure will directly dominate U.S. economic and foreign policy decisions, forcing the administration to adopt unconventional means to please voters, with the core lever being addressing the cost-of-living crisis.
A new structural bull market. Simultaneously, the market must be wary of the upcoming massive fiscal stimulus. Trump is expected to use tariff revenue to issue cash checks to middle- and low-income groups, which will put new upward pressure on long-end Treasury yields, fundamentally changing the macro liquidity environment of 2026.
New Energy Strategy: The Political Calculus of Lowering Oil Prices
To win the "affordability" debate, the Trump administration's fastest and most direct method is to lower oil prices. David Woo stated that the fundamental motive behind recent U.S. actions targeting Venezuela is not ideological export but to directly control the country's oil resources (accounting for 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 one of the core trades for 2026 is shorting crude oil.
David Woo predicts that crude oil prices could fall to the high $40s or even $50 range 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 Rebates and the Reversal of the K-Shaped Economy
Beyond lowering oil prices, another potential major move is large-scale fiscal stimulus. David Woo predicts a 65% probability that Trump will launch a new round of stimulus before the midterm elections. The specific path involves using the huge tariff revenue collected last year to issue "tariff rebate" checks of $2,000 each to Americans with annual incomes below $75,000.
To ensure the bill passes Congress, Trump might bundle this rebate plan with an extension of Obamacare subsidies, which Democrats care about, and bypass Senate obstruction using a Reconciliation Bill. This strategy aims to transform the victims of the tariff war (consumers) into beneficiaries, achieving a "win-win" in both geopolitics and the domestic economy.
This targeted stimulus for middle- and low-income groups, combined with increased disposable income from lower oil prices, will benefit retailers serving mass consumption (Consumer Staples) and may reverse the current market consensus on the "K-shaped" economic recovery, potentially changing the situation where only the wealthy have prospered.
The End of the International Order and the Gold Bull Market
The radical geopolitical measures taken by the U.S. 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 nation decides to act solely on might rather than rules, the international system that previously protected the interests of small countries ceases to exist.
This shift has profound implications for asset allocation:
Short Emerging Market Stocks: In the new order lacking rule-based protection, small countries face higher geopolitical risks, invalidating the traditional "convergence trade" logic.
Long Defense Sector: Security anxieties will force countries to significantly increase defense spending.
Long Gold: As the U.S. ceases to act as the benevolent guarantor of the international order, the credibility foundation of the U.S. dollar as a reserve currency is eroded. Against a backdrop of widening deficits and rising geopolitical realism, gold will become a key asset for hedging against a disordered world, with potential upside of over 10% even without a dollar collapse.
The Biggest Risk: Stock Market and AI Bubble
Although Trump is trying to win over voters with livelihood policies, the stock market remains his "Achilles' heel."
David Woo warns that current high U.S. stock valuations are nearing levels seen during the internet bubble, and capital gains tax is a significant source of federal tax revenue. A 20%-30% drop in the stock market would not only trigger an economic recession but also cause the fiscal deficit to deteriorate sharply.
The biggest risk point in the market currently is the bursting of the AI bubble. Wall Street widely expects AI-related capital expenditure to grow another 50% in 2026, but increasingly fierce model competition, hardware bottlenecks, and future return rate issues 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, thereby threatening Trump's re-election plans.
