This year's financial market real bet is not purely on economic data, but on whether Trump can continue to maintain policy dominance after the 2026 midterm elections.

Winning means three things continue:

• Tax cuts continue
• Deregulation continues
• Fiscal stimulus continues

So the US stock market, AI, cryptocurrencies, RWA, and on-chain finance all dare to price in future growth in advance.

But if the midterm elections fail, the risk will reverse instantly.

Because the core support of the market now is not undervaluation, but policy expectations:

1. Tech stocks rely on AI revolution and tax cut expectations to support valuations;
2. The crypto market relies on deregulation and institutional entry to support valuations;
3. The bond market relies on future rate cuts and a soft landing of the economy to support confidence;
4. The US dollar system relies on the credibility of American institutions to maintain global capital inflows.

The market is actually betting:

Trump’s camp continues to control Congress
↓
Policy continues to advance
↓
Corporate profits grow
↓
Liquidity improves
↓
Risk assets continue to rise

If the midterm elections fail:

Republicans lose control of Congress
↓
Policy advancement stalls
↓
Tax cut and fiscal stimulus expectations decline
↓
Corporate earnings expectations are revised downward
↓
Market re-evaluates

The real danger is the transmission chain:

Election loss
↓
Decline in policy authority
↓
Uncertainty in tax cuts, regulatory reforms, and crypto-friendly policies
↓
Overvalued sectors in US stocks lead the valuation sell-off
↓
Popular AI assets face profit-taking
↓
Risk capital withdraws from the crypto market
↓
Long-term US bond yields fluctuate more intensely
↓
Global risk assets come under pressure simultaneously

This is also why Wall Street is highly focused this year on:

• Whether inflation continues to decline
• Whether the Federal Reserve begins a rate-cut cycle
• Whether the US fiscal deficit continues to expand
• Changes in midterm election polls

Essentially:

The market is not trading “reality is already good.”

But trading:

That Trump’s policies can still continue over the next two years.

Therefore, the current market looks more like:

Policy bull market + liquidity bull market + AI revolution bull market

Three factors stacking together.

If all three logics hold:

2026-2027 could become a phase of continued expansion for risk assets.

If there is a major failure in the midterm elections:

The market will reassess high valuation, high leverage, and high expectations assets.

By then, Trump is likely to shift from “market savior” to “fall guy for financial storms.”

The real big gamble in 2026 is not whether the Fed will cut rates,

But whether Trump’s deals can still hold after the midterm elections.

Once the logic is disproved, all previously overextended expectations will be re-priced.