# The Game After the Midterm Elections: Trump's Policy Direction and Its Profound Impact on the Federal Reserve and Global Assets

As the November 2026 U.S. midterm elections approach, President Trump's administration will reach a critical turning point. This election not only determines control of Congress but will profoundly influence Trump's policy space and strategic choices over the next two years. Against the backdrop of persistently weak economic polls and lingering inflation pressures, the Trump administration may adopt more aggressive coercive measures, which will pose a severe test to the Federal Reserve's monetary policy independence and, through interest rate expectations and liquidity channels, deeply impact the pricing logic of cryptocurrencies such as Bitcoin and Ethereum, as well as precious metals like gold and silver.

## I. Political Landscape After the Midterm Elections and Trump's Response Strategy

The 2026 midterm elections will be held on November 3rd, with all 435 House seats and 35 Senate seats up for reelection. According to historical patterns, the party in power typically suffers losses in midterm elections—since the 1930s, the ruling party has averaged losses of 28 House seats and 4 Senate seats. The Republican Party currently holds only a slim majority in both chambers of Congress; losing just 3 House seats would result in loss of House control.

Polling data is highly unfavorable for Republicans. Most voters are dissatisfied with the U.S. economic situation and the Trump administration's economic performance. Trump's approval rating has dipped below 40%, approaching the lowest levels of his two terms. More critically, voters are deeply frustrated by elevated living costs, with only approximately 30% of Americans believing Trump has met expectations in addressing inflation. Some analysts point out that Trump's approval rating on economic issues has for the first time fallen behind his overall approval rating, meaning economic performance is becoming a "headwind" dragging down his administration rather than a "safety net" as in his previous term.

Facing this predicament, Trump's response strategy may follow a dual path:

**Domestically**, intensifying administrative pressure on the Federal Reserve. To create an appearance of economic improvement before the midterm elections, Trump urgently needs a low-interest-rate environment to stimulate growth. This explains why he has repeatedly publicly demanded the Federal Reserve "cut rates immediately" and has even launched a criminal investigation against Federal Reserve Chair Powell through the Department of Justice. Trump has also demanded that the Supreme Court agree to his removal of Federal Reserve Board member Cook, attempting to clear obstacles on the path to rate cuts.

**Internationally**, potentially adopting a more aggressive diplomatic posture. With unfavorable election prospects, Trump may engage in foreign intervention to mobilize voter sentiment and divert domestic contradictions. His earlier deployment of military to control Maduro had the purpose of courting Latino voters. Should Republicans lose House control after the midterm elections, Trump may continue to challenge constitutional boundaries to consolidate his political legacy, with policy implementation increasingly reliant on executive orders rather than congressional legislation.

## II. The Federal Reserve's "Triple Pressure" and Policy Direction

The Federal Reserve faces triple pressure from political coercion, inflation rebound, and economic slowdown.

**Politically**, Trump's erosion of the Federal Reserve's independence has broken through traditional boundaries. Beyond publicly calling for rate cuts to 1%, the government has even launched a criminal investigation against Powell. Given that the Supreme Court may not support arbitrary removal of Federal Reserve board members, Trump is more likely to reshape monetary policy direction by appointing a new Fed Chair in May. Markets widely expect that his successor will be more "compliant," cooperating with the Treasury Department to implement stimulus policies.

**Economically**, the U.S. faces "stagflation" risks. The latest data shows that non-farm payrolls unexpectedly declined by 92,000 in February, with unemployment rising to 4.4%; while the January core PCE price index year-over-year increase expanded to 3.1%, hitting a near two-year high. Q4 2025 GDP annualized quarter-over-quarter revised growth was sharply downgraded to 0.7%. This combination of "high inflation and low growth" places the Federal Reserve in a dilemma: rate cuts may fuel inflation, while maintaining rates may accelerate economic slowdown.

**Market expectation-wise**, the rate-cutting window has shifted significantly later. Futures traders currently anticipate only one to two Fed rate cuts this year, with the first cut potentially delayed until September. Goldman Sachs, Morgan Stanley, and other institutions have adjusted forecasts that if oil prices fail to decline, the first rate cut could be delayed until year-end. This contrasts sharply with the earlier optimistic market expectations for mid-year rate cuts beginning.

Notably, the Federal Reserve may adopt a "stable appearance, loose reality" operational strategy. While maintaining a constant benchmark rate, the Federal Reserve has already halted quantitative tightening in December 2025 and initiated a monthly $40 billion Treasury purchase plan—which is essentially "implicit quantitative easing." The Fed's balance sheet is expected to expand by $500 billion to $600 billion in 2026. This combination of "price stability, quantitative easing" maintains a hawkish appearance while injecting liquidity into markets.

A more aggressive path would be, if inflation causes long-end rates to spiral out of control, the Federal Reserve may reinstate yield curve control—setting rate ceilings and making unlimited Treasury purchases. This would artificially suppress nominal rates, creating deeply negative real rates in a high-inflation environment, becoming the strongest catalyst for pricing across asset classes.

## III. Bitcoin and Ethereum: Dual Narratives Driven by Liquidity

For Bitcoin and Ethereum, the Federal Reserve's liquidity stance is far more critical than rate decisions themselves. Historical data shows that for each 1 percentage point Fed rate cut, Bitcoin averages gains of 13%-21%, which can amplify to 30% under favorable conditions; while in easing cycles, Ethereum performs more aggressively with historical gains reaching 300%-500%.

**Short-term**, Trump's public pressure has already directly boosted the crypto market. After Trump posted on Truth Social calling for the Federal Reserve to "cut rates immediately" on March 13th, Bitcoin quickly broke through dollars, rising 2.4% within 24 hours. This indicates the market maintains high sensitivity to any signals pointing toward easing.

However, short-term movements still face suppression from geopolitical risks. Ongoing Middle East conflicts continue to push energy prices higher; if oil maintains elevated levels, inflation pressure will deprive the Fed of policy room for early easing. Market participants warn that geopolitical tensions could trigger massive sell-offs in both equities and Bitcoin, even triggering liquidation cascade that could push Bitcoin below dollars.

**Medium to long-term**, the macroeconomic logic is clearer. BitMEX co-founder Arthur Hayes points out that while the market commonly believes war is bullish for Bitcoin, the substance is actually that "money printing is bullish for Bitcoin." He explicitly states that he won't increase Bitcoin holdings until the Federal Reserve clearly pivots toward easing and restarts the "money printer." This means that once the Federal Reserve clearly turns dovish—whether through rate cuts, balance sheet expansion, or yield curve control—it will mark the optimal buying moment for crypto assets.

Ethereum's narrative is richer. Beyond liquidity drivers, staking yield attractiveness will become more pronounced in a low-rate environment. If real rates turn negative, DeFi ecosystem activity is expected to surge significantly, allowing Ethereum to demonstrate stronger resilience than Bitcoin. Continued inflows into spot ETFs also provide structural support to the market—currently 172 listed companies hold Bitcoin, and stablecoin scale reaches $137.7 billion.

Collectively, 2026 could become a "turning point" for cryptocurrencies. In the base case scenario (50 basis points of cuts), Bitcoin is projected to trade in the $85,000-$110,000 range; should a dovish pivot occur (100-150 basis points of cuts with negative real rates), institutional price targets point to $138,000-$250,000.

## IV. Gold and Silver: Interplay of Real Rates and Hedging Demand

Gold and silver price movements will depend on the tug-of-war between real rate expectations and geopolitical hedging demand.

**Near-term suppressive factors**: Inflation rebound has reinforced market expectations that rates will remain "higher for longer," pushing the dollar index above 100, hitting a year-to-date high. Dollar strength and rising U.S. Treasury yields exert considerable headwinds on gold prices. Last week international gold prices fell 1.88%, with silver futures down 3.52%. Additionally, Poland's central bank plan to sell portions of its gold reserves to fund defense spending has also intensified short-term market volatility.

**However**, geopolitical risks provide floor support. Escalating U.S.-Israel-Iran tensions create substantial uncertainty, continuously driving risk-on buying in precious metals markets. Analysts at ING note that despite unfavorable rate environments, geopolitical uncertainty still provides considerable risk premium to markets, offering support for a precious metals price floor.

**The medium to long-term core logic** lies in dollar credit weakening and real rate outlook. Since Russia-Ukraine conflict in 2022 and the U.S. freezing of Russian foreign exchange reserves, global central bank demand for gold has set records for four consecutive years. This "de-dollarization" trend continues through 2026, with Poland's central bank recently announcing plans to purchase an additional 150 tons of gold.

**The more explosive catalyst** is a policy shift toward "letting the economy overheat." Analysts point out that the Trump administration may abandon fiscal tightening plans, instead betting on rapid growth to dilute debt pressure. If inflation causes long-end rates to spiral out of control, the Federal Reserve may implement yield curve control, artificially capping nominal rates. In an environment of high inflation with capped nominal rates, real rates will turn deeply negative—considered the most critical driver for gold appreciation. Based on this pathway, some analysts predict gold could touch $6,000 in 2026, with silver breaking through $130.

Silver's dual nature (precious metal + industrial metal) gives it additional elasticity amid energy transition and AI investment waves. However, caution is warranted regarding AI investment bubble risks in the near-term—2025 U.S. economic growth's important engine is massive AI investment, and whether this can sustain into 2026 remains uncertain.

## V. Conclusion and Outlook

Standing at the mid-2026 timeframe, we can sketch the following macroeconomic landscape:

**The midterm elections are a watershed.** Should Republicans suffer losses, Trump will lose congressional legislative channels, with policy focus completely shifting to dual-track strategies of administrative coercion plus aggressive foreign policy to divert domestic contradictions. The Federal Reserve will face unprecedented political pressure, with its independence facing severe tests.

**The Federal Reserve's policy path exhibits "nominal hawk, actual dove" characteristics.** While benchmark rates remain unchanged on the surface, the balance sheet has quietly expanded. The true policy pivot point likely occurs in September or year-end, depending on inflation data and geopolitical evolution.

**The core drivers of asset prices are being reshaped:** cryptocurrencies are most sensitive to Fed liquidity, with true bull markets requiring sight of the "money printer" restarting; gold responds to real rate expectations, and if yield curve control materializes with deeply negative real rates, gold will face an epic rally.

**Ultimately**, all asset prices will return to one fundamental question: Can America find its way out of the stagflation quagmire? Should Trump's "growth breakthrough" strategy succeed, risk assets will benefit from economic recovery; should policy mistakes deepen stagflation, gold's hedging properties will shine again. For investors, understanding the evolution of political logic and monetary policy dynamics after the midterm elections will be key to navigating market volatility throughout 2026.