4 Key Issues Investors Must Watch in 2026 (Quarterly Breakdown)
π What Events Await in 2026?
If 2025 was a dramatic rollercoaster, what does 2026 have in store? There are important events you should mark on your calendar. Let me break down which issues could shake the markets each quarter.
Success in investing comes from preparation. The more you know in advance, the better positioned you'll be! π
ποΈ Q1: Trump Tariff Supreme Court Ruling
The biggest issue in Q1 2026 is the Supreme Court ruling on tariffs.
Why Does This Matter?
There's a possibility that the reciprocal tariffs imposed by the Trump administration could be ruled unconstitutional. If that happens, the ripple effects would be substantial.
If reciprocal tariffs are ruled unconstitutional:
- π° Plans to stimulate the economy through tariff revenue could be derailed
- π Efforts to fill the fiscal deficit with tariff revenue could be weakened
- π¦ Chain reactions affecting US fiscal and growth-related issues
In other words, the tariff issue doesn't end with trade alone. Since it's deeply connected to America's fiscal health and growth strategy, it could deliver an unexpectedly major shock to markets.
π Checkpoint
Watch for Supreme Court news on tariffs in Q1. The ruling could significantly change market direction.
π¦ Q2: Fed Chair Transition
In May, Chair Powell's term expires. Who becomes the new Fed Chair could shift market direction.
Who Will Be the Next Chair?
Current market expectations suggest a Trump-friendly figure will become Fed Chair. Names like Kevin Warsh and Kevin Hassett are being mentioned.
An interesting scenario:
Steve Miran, currently on the Fed Board, steps down in January. If that seat becomes vacant, there's talk that the next Fed Chair candidate could join as a board member first.
What happens then?
- π€ FOMC meetings where the current chair (Powell) and the chair-designate meet together
- π Could be quite awkward and uncomfortable meetings
- π Possibility of accelerating Powell's lame duck status
What Happens When a New Chair Arrives?
Two contrasting scenarios exist:
Scenario 1: Rate Cut Expectations π½
- Expectations that the new chair will cut rates significantly following Trump's wishes
- Policy rates could fall substantially
Scenario 2: Inflation Concerns πΌ
- What if rates are cut significantly while inflation pressure remains?
- Concerns that prices could explode upward
- Market rates (long-term rates) could actually rise
π¨ A Phenomenon Already Appearing
In fact, we're already observing a unique phenomenon. The Fed has cut the policy rate by 175 basis points since September of last year:
| Rate Type | Change |
|---|---|
| Policy Rate | 175bp cut |
| 2-Year Treasury | Almost unchanged |
| 10-Year Treasury | Actually rose (back to pre-cut levels) |
| 20/30-Year Treasury | Rose even more |
The anomaly of long-term rates rising despite policy rate cuts is occurring. This could be a signal that markets are worried about inflation.
π Checkpoint
Watch the May Fed Chair transition period closely. The bond market's reaction will be especially important.
π³οΈ Q3-Q4: Midterm Elections
November brings midterm elections. This crucial vote will determine the next two years of the Trump administration.
Looking at Past Examples...
Remember Trump's first term in 2016?
- ποΈ 2016: Republicans won the presidency, Senate, and House
- π 2018 midterms: Lost the House to Democrats
- π Policy implementation became significantly more difficult afterward
A similar pattern could emerge this time. Trump won the presidency, Senate, and House in 2024βbut what if Republicans lose the House in the 2026 midterms?
Expected outcomes:
- π Acceleration of Trump's lame duck status
- π« Weakened policy momentum
- πΉ Increased market uncertainty
Trump's Current Situation
Trump's approval ratings have dropped significantly. And there have been symbolic events:
- π½ Lost a seat in Miami to Democrats for the first time in 28-30 years
- ποΈ Zohran Mamdani won the NYC mayoral race
- Won by targeting the "Affordability" issue
- Absorbed frustration over high rents and prices
Inflation Is the Key Variable
Ultimately, the key variable for midterms is inflation. After all, inflation is why Biden stepped aside.
Trump faces his own dilemmas:
- π― Need to control prices
- π Need to give something populist (possible $1,000-$2,000 stimulus checks)
π Checkpoint
Watch inflation indicators and changes in Trump's economic policies ahead of midterm elections.
π 2026 Quarterly Key Issues Summary
| Quarter | Key Issue | Focus Points |
|---|---|---|
| Q1 | Tariff Supreme Court Ruling | Fiscal/growth impact depending on constitutionality |
| Q2 | Fed Chair Transition | Powell's lame duck, new chair's policy direction |
| Q3-Q4 | Midterm Elections | House outcome, Trump lame duck possibility |
| Year-round | Inflation | Price trends as the key variable for all issues |
π‘ Final Thoughts
2026 has major events waiting every quarter. Q1 tariff ruling, Q2 Fed Chair transition, Q3-Q4 midterm elections... It's important to think ahead about how each event might impact markets.
Inflation in particular will be the key variable throughout 2026. Whether prices are brought under control affects Fed policy, midterm election outcomes, and even Trump's political fateβthey're all connected.
In my next post, I'll dive deep into the Great Divergence in Monetary Policy! π