One year after Trump's return to the White House: The S&P 500 has risen nearly 16%. In a midterm election year, how should investors hedge risks and position themselves?
One year since Trump returned to the White House.
A 16% increase within one yearThis is the gain during the first year of President Trump's return to office. $S&P 500 Index (.SPX.US)$
However, behind this seemingly impressive figure,Wall Street experienced a 'rollercoaster' journey marked by sharp pullbacks and record highs.
This year proved to investors that even in the face of sweeping policy changes, markets remain highly resilient. However, as we enter the uncertain landscape of 2026, this resilience will face tougher tests.
At this juncture, with Trump’s 2.0 era entering the midterm election year, what should investors pay attention to? Which sectors are likely to benefit? This article will explore these questions one by one.
A Bull Market Amid Turbulence: The Significance of a 16% Gain
Since Donald Trump was sworn in as the 47th U.S. president on January 20, 2025, the U.S. stock market has demonstrated remarkable resilience. Despite Trump’s announcement on April 2 of a tariff policy dubbed 'Liberation Day,' which sparked market volatility, investors quickly adopted a 'buy-the-dip' strategy. This pattern, jokingly referred to as the 'TACO trade' by some market participants, reflects a new consensus:The current administration's aggressive policy declarations may not necessarily translate into lasting market damage.
Historically speaking, a 16% gain is solid, surpassing the historical median of 9% for the first year of a presidency since 1929. However, this is not the 'strongest ever.' By comparison, the S&P 500 rose 16.4% during President Biden’s first year, while Trump’s first term in 2017 saw an even more dramatic surge of 23.7%.
Source: DOW JONES MARKET DATA
For those who originally anticipated that Trump’s second term would bring 'extreme benefits' to the market, this year has been full of challenges.
Chris Maxey, Managing Director and Chief Market Strategist at Wealthspire Advisors, described:"The first year of Trump's return to the White House was like being bombarded with a firehose of news."He pointed out that the most important lesson investors learned in the past year is 'to remain patient.' Overanalyzing political headlines often leads to portfolio missteps rather than gains.
There were widespread market concerns that Trump’s volatile tariff policies could trigger a global trade war, reignite inflation, or push the economy into recession. However, so far, these worst-case scenarios have not materialized. Although some tariff policies are still awaiting a final ruling from the Supreme Court, the S&P 500 has set 42 new closing highs since January of last year, while the Dow Jones and Nasdaq indices have also refreshed records 23 and 36 times respectively.
2026 Outlook: The Shadow of Midterm Elections and Geopolitical Tensions
However, as the calendar turns to 2026, investors may no longer be able to maintain an especially optimistic stance. The market is heading into what traditionally has been the weakest-performing 'midterm election year.' Historical data shows that since 1948,the S&P 500 has risen by an average of only 4.6% during the second year of a president’s term.
More concerning is that 2026 did not start smoothly. In just the first half of January, the market faced a series of geopolitical and policy shocks:
– Venezuela Crisis: U.S. military action led to the arrest of Venezuelan leader Maduro.
– Greenland Controversy: Trump once again threatens to take over or purchase Greenland.
– US-Iran Tensions: Relations between the US and Iran have become strained again.
– Federal Reserve Crisis: A criminal investigation targeting current Federal Reserve Chairman Jerome Powell has sparked serious concerns in the market about the independence of the central bank.
Particularly noteworthy is that last week, a series of actions by Trump once again made waves in the investment community, including tariff policies and the selection of the Federal Reserve chairman.
Tariff Policy:According to CCTV News, on Saturday (January 17th local time), US President Trump announced that starting February 1, 2026, a 10% tariff will be imposed on all goods exported to the US from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland. Starting June 1, 2026, the tariff rate will increase to 25%.The reason for imposing tariffs is that these countries oppose US control over Greenland, further escalating the dispute over Greenland's future ownership.
Uncertainty Surrounding the Fed Chair Nomination:Trump hinted last Friday that Hassett might not become the new Federal Reserve Chair, after Hassett repeatedly called for significant interest rate cuts by the Fed. With Hassett likely to remain as the Director of the National Economic Council (NEC), the race has effectively narrowed to a 'three-way contest': Blackrock's Global Fixed Income CIO Rieder versus former Fed Governor Kevin Warsh and current Governor Christopher Waller. Both Warsh and Waller have extensive central bank experience, representing a more traditional choice compared to Rieder’s market-oriented background.
Source: Polymarket
In fact, according to Dongwu Securities, in 2026 Trump will leverage all political resources at his disposal — including but not limited to trade policy under White House authority, fiscal policy under Congress, and monetary policy under the Federal Reserve —In preparation for the final 'exam' of his political career — the midterm elections.
Trump’s strategies for the midterms consist of three policies, which are complementary and together form the main trading theme of the 2026 overseas policy agenda: ① Trade Policy:Trump may escalate tariff conflicts again to divert attention, gain votes, pressure the Fed to cut rates, and generate fiscal revenue;② Monetary Policy:The new Fed Chair will take office in May 2026, at which point the Fed is expected to initiate interest rate cuts that exceed expectations and economic necessity. The 'Fed Put' will replace TACO to hedge the impact of tariffs, with loose monetary policy boosting the economy and stock market;③ Fiscal Policy:Interest rate cuts and tariffs will fund loose fiscal policies. In the second half of 2026, Trump is expected to continue introducing expansionary fiscal policies to gain support for the midterm elections.
For the capital markets, the three policies revolving around Trump's midterm elections will combine into a policy mix of recurring tariffs and dual monetary-fiscal easing, pushing the U.S. economy from a soft landing to expansion and posing greater upside risks to U.S. inflation by the end of 2026 and beyond.For the markets:
① Recurring tariffs mean that risk appetite will still follow a mean-reversion trading strategy of selling high and buying low,
② Dual monetary-fiscal easing means that global equities, commodities, and otherrisky assets will benefit from both liquidity and fundamental drivers throughout the year,
③ The Fed’s leadership change brings unexpected and excessive interest rate cuts beyond economic necessity,leading to lower U.S. dollar rates and deteriorating credit quality,corresponding to upward pressure on gold, declines in the U.S. Dollar Index and the 2-year Treasury yield, along with loose fiscal policy; the 10-year Treasury yield will remain volatile.
In the Trump era, which opportunities should be closely monitored?
Since Trump took office, his every word and action has deeply impacted the U.S. stock market.
Previously,Is Trump performing 'alchemy' in the U.S. stock market? These four key sectors may present strategic opportunities.As previously mentioned, after Trump took office, investments in MP, Intel, American Lithium Corporation (LAC), and mineral exploration company TMQ have exploded in the U.S. stock market,For investors, understanding and following the logic behind government investment decisions is not only about capturing opportunities but also a necessary strategy for risk mitigation.
Market opinions generally believe that the following resources, electric power and energy, space exploration, and semiconductors are four areas that may benefit from the Trump 2.0 era. Relevant concept stocks have been summarized for investors' reference:
Specifically:
semiconductors.Pay attention to $NVIDIA (NVDA.US)$ 、 $Broadcom (AVGO.US)$ 、 $Advanced Micro Devices (AMD.US)$ 、 $Micron Technology (MU.US)$
rare earth companiesPay attention to $MP Materials (MP.US)$ 、 $TMC the metals (TMC.US)$ 、 $USA Rare Earth (USAR.US)$ 、 $Critical Metals (CRML.US)$ etc.;
lithium mining companiesPay attention to $Rio Tinto (RIO.US)$ 、 $Sociedad Quimica Y Minera De Chile (SQM.US)$ 、 $Albemarle (ALB.US)$ 、 $Lithium Americas (LAC.US)$ etc.;
Uranium mining companiesWorth paying attention to $Cameco (CCJ.US)$ 、 $Uranium Energy (UEC.US)$ 、 $Centrus Energy (LEU.US)$ 、 $Energy Fuels (UUUU.US)$ etc.;
Copper mining companiesWorth paying attention to $Southern Copper (SCCO.US)$ 、 $Freeport-McMoRan (FCX.US)$ etc.;
GraphiteWorth paying attention to $NOVONIX (NVX.US)$ 、 $Nouveau Monde Graphite (NMG.US)$ 、 $Westwater Resources (WWR.US)$ ；
AntimonyWorth paying attention to $Nova Minerals(Delisted) (NVA.US)$ 、 $United States Antimony (UAMY.US)$ ；
Space stocksWorthy of attention $Rocket Lab (RKLB.US)$ 、 $AST SpaceMobile (ASTS.US)$$EchoStar (SATS.US)$ 、 $GE Aerospace (GE.US)$ 、 $RTX Corp (RTX.US)$ 、 $Boeing (BA.US)$ 、 $Lockheed Martin (LMT.US)$ ；
Nuclear powerWorthy of attention $Oklo Inc (OKLO.US)$ 、 $BWX Technologies (BWXT.US)$ 、 $NuScale Power (SMR.US)$ 、 $NANO Nuclear Energy (NNE.US)$ ；
BatteriesWorthy of attention $Tesla (TSLA.US)$ 、 $Bloom Energy (BE.US)$ 、 $QuantumScape (QS.US)$ 、 $Eos Energy (EOSE.US)$ ；
Electric grid and energy storageWorthy of attention $GE Vernova (GEV.US)$ 、 $Vistra Energy (VST.US)$ 、 $The AES Corp (AES.US)$ 、 $Fluence Energy (FLNC.US)$
In addition,Trump Trade vs Frontier Technology: Which Winners Is Wall Street Betting On?The article also mentioned that Morgan Stanley released a report titled 'National Security Index,' which focuses on four key areas:Rare earths and strategic metals, batteries and energy storage, lithium, as well as nuclear power and uranium mining.These companies are precisely the ones being heavily traded as part of the US stock market's 'Trump Trade.'
Specifically:
Key resources supporting AI, electric vehicles, etc. —— Rare earths and strategic metalsIncluding $Ramaco Resources-A (METC.US)$ 、 $United States Antimony (UAMY.US)$ 、 $USA Rare Earth (USAR.US)$ 、 $NioCorp Developments (NB.US)$ 、 $Critical Metals (CRML.US)$ 、 $MP Materials (MP.US)$ 、 $Idaho Strategic Resources (IDR.US)$ 、 $Ivanhoe Electric (IE.US)$ 、 $Carpenter Technology (CRS.US)$ 、 $Ivanhoe Mines Ltd (IVN.CA)$ 、 $Wheaton Precious Metals (WPM.US)$ 、 $First Quantum Minerals Ltd (FM.CA)$ 、 $Freeport-McMoRan (FCX.US)$ 、 $Gold.com (GOLD.US)$ ；
The 'white oil' of new energy —— LithiumIncluding $Albemarle (ALB.US)$ 、 $Sigma Lithium (SGML.US)$ 、 $Lithium Americas (LAC.US)$ 、 $Standard Lithium (SLI.US)$ 、 $Lithium Argentina AG (LAR.US)$ ；
The 'antidote' to AI electricity shortages —— Nuclear energy and uranium miningIncluding $Energy Fuels (UUUU.US)$ 、 $Centrus Energy (LEU.US)$ 、 $Cameco (CCJ.US)$ 、 $BWX Technologies (BWXT.US)$ 、 $Uranium Energy (UEC.US)$ 、 $NANO Nuclear Energy (NNE.US)$ 、 $Mirion (MIR.US)$ 、 $NexGen Energy (NXE.US)$ 、 $Oklo Inc (OKLO.US)$ 、 $Lightbridge (LTBR.US)$ 、 $ASP Isotopes (ASPI.US)$ 、 $Uranium Royalty (UROY.US)$ 、 $Encore Energy (EU.US)$ ；
The 'antidote' to AI electricity shortages —— Batteries and energy storageIncluding $Eos Energy (EOSE.US)$ 、 $Solaris Energy Infrastructure (SEI.US)$ 、 $Tesla (TSLA.US)$ 、 $Amprius Technologies (AMPX.US)$ 、 $Microvast (MVST.US)$ 、 $Ballard Power Systems Inc (BLDP.US)$ 、 $American Battery Technology (ABAT.US)$ 。
Conclusion: Dancing amidst 'chaos and stimulus,' precisely capturing policy dividends
Looking back at the first year of Trump's return to the White House, the market demonstrated 'resilience' with a 16% increase. However, as we approach the critical juncture of the 2026 midterm elections, the investment logic is shifting from simply 'buying the dip' to a more nuanced strategic game.
Faced with the complex situation of both 'tariff threats' and 'monetary easing,' investors must be wary of the 'roller-coaster' volatility brought on by geopolitical events (such as the Greenland dispute and the Federal Reserve leadership change) while also being quick to capture structural opportunities arising from policy shifts.
The future market may no longer be a broad-based rally but rather a battleground of sector divergence. From the autonomous control of rare earths and strategic metals, to the energy revolution in nuclear power, to the national competition in space exploration and hardcore technology, closely following the core threads of the 'Trump trade' and seeking certainty within industries amid macroeconomic fluctuations will be the best strategy for navigating this political and capital storm. In an era where information explodes like a flood, understanding the cards that those in power play to win midterm elections is more important than predicting index movements.
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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