Wall Street has always had a penchant for creating catchy English acronyms to encapsulate trading logic, such as FANG (referring to Facebook, Amazon, Netflix, and Google's parent company Alphabet) for tech giants, FOMO (Fear Of Missing Out)/YOLO (You Only Live Once) for describing market sentiment, and the tariff-policy-mocking TACO (Trump Always Chickens Out). Now, Ed Clissold, Chief US Strategist at Ned Davis Research, intends to coin a new term—the Big MAC trade, an acronym corresponding to "Big Midterms Are Coming." He wants to use this concept to summarize what he sees as the core theme for the US stock market in 2026: the direction of policy around this autumn's congressional elections and its impact. At the beginning of the year, US President Trump intensively issued a series of policy-like statements, most of which were released via social media and possess almost no legislative power. However, these actions sufficiently indicate that Trump is focusing on boosting the Republican party's chances in the November elections, with his policy leverage aimed squarely at the widely discussed US "affordability crisis." The impact of this trend on the stock market could be profoundly significant. Take last week's market performance: when Trump demanded credit card issuers cap interest rates at 10%—a level less than half the current average rate—bank stocks immediately fell sharply; after he ordered defense contractors to suspend dividend payments and reinvest funds into production, the defense sector also suffered heavy losses; and following recent government criticism of the Federal Reserve's independence, the entire Wall Street was gripped by panic on Monday. "The Trump administration's focus on affordability ahead of the midterm elections has already led to a series of measures targeting oil prices, mortgage rates, credit card rates, and the federal funds rate," Clissold stated. He pointed out that the clearest risks are concentrated in the financial sector, where adjustments to mortgage, credit card, and overall interest rate policies will all impact it. In fact, for risk-sensitive investors, Big MAC is more of a market theme than a specific trading strategy. Clissold wrote in his report, "Policy adjustments targeting specific industries before the midterm elections will be a major risk," and currently, the market is unclear on how to hedge against this type of risk. Tom Essaye, founder of Sevens Report, stated that government policy "chaos" is another risk facing the market in 2026. He expressed concern that the market's muted reaction to Trump's recent repeated attempts to rewrite economic and business policies might signal that the market is becoming desensitized to changes in policy details. "This is a risk we need to watch closely going forward, because the market's apparent indifference to policy uncertainty seems to be encouraging more aggressive tendencies from this administration," he wrote in a report on Monday. Essaye added, "Uncertainty will eventually damage the market; it hasn't happened yet, but we are moving step by step towards a tipping point." Although Trump's method of policy announcement via Twitter mostly triggers only short-lived market volatility, it has already fostered a sense of panic among investors and strategists. The US President's remarks can impact almost every corner of Wall Street, making it difficult for investors to stick to their established trading strategies. "No investor wants to start the trading day and suddenly find that the individual stocks or sectors they hold have become the target of that day's policy, causing the stock price to gap down 5% or even 10%," said Michael O'Rourke, Chief Market Strategist at Jonestrading Institutional Services LLC. O'Rourke noted that with 42 weeks remaining until the US midterm elections, the White House has ample time to introduce policies targeting other industries, potentially upending the entire market's trajectory. For a market where valuations are already perfectly priced, this could easily trigger a sell-off. "If one or two more sectors are targeted by the administration this weekend or next week, investors will start to reflect: 'Valuations are already this high, I don't need to stay in the market and bear this kind of risk,'" he said in a telephone interview. In Clissold's view, the reason for creating the new term Big MAC is that the previous TACO trade has lost its luster. This acronym, coined by a Financial Times journalist, mocked Trump's tendency to threaten punitive tariffs but then "chicken out" before implementation. Even setting aside the Trump administration's unconventional approach to economic governance, stock market returns in midterm election years are typically below average, primarily due to uncertainty surrounding policy stances. Post-World War II data shows that the party controlling the White House often suffers significant losses in congressional midterm elections. Data from US research firm CFRA shows that during midterm election years, the S&P 500 index experiences an average peak-to-trough drawdown of as much as 18% within the year. Sam Stovall, Chief Investment Strategist at CFRA, wrote in a report that since 1945, when one party controls both the White House and both houses of Congress and faces the risk of losing control, the stock market's average annual gain is a mere 3.8%, with nearly half of those years recording declines. The impact of political factors and specific events on individual stocks has resulted in the actual volatility of single stocks being nearly 22 percentage points higher than the volatility of the broader market index. "The impact of headlines is mostly concentrated at the individual stock or sector level," said Dennis Debusschere, President and Chief Market Strategist at 22V Research, noting that, by historical standards, the influence of macro factors on the S&P 500 index as a whole remains low. Nonetheless, some investors have already shifted to a more cautious stance. JPMorgan's trading desk noted that, pressured by Fed policy, US stocks might underperform their peers in the short term. Similarly, strategists at Scotiabank said on Tuesday that global equities might once again outperform the S&P 500 in 2026, citing that "escalating judicial attacks against Powell" could increase the risk premium investors demand for holding US stocks. Kimberly Forrest, Chief Investment Officer at Bokeh Capital Partners LLC, stated that to cope with additional political risk, investors need to lengthen their investment horizon to extend beyond the current political cycle. Her own investment horizon is set at 3 to 5 years. Forrest revealed that her firm's holdings include Exxon Mobil Corp.—last week, this energy giant angered Trump by stating that Venezuela "does not represent a viable investment opportunity." "I don't care if they go into Venezuela or not," she said in a phone call regarding Exxon Mobil, describing the stock as a long-term investment. She indicated that for funds pursuing short-term trading strategies, the current market environment is undoubtedly challenging. Her advice was just four words: "Good luck to you."
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