CICC: The core theme in 2026 may not be "stimulating an overheated economy" but rather "easing the pressure of living costs" - Three insights into investing in the United States.

Zhongjin released a research report stating that 2026 is a midterm election year in the United States, which is a very important turning point for Trump. Unlike in the past, the focus of this round of elections has shifted to the real-life pressures brought about by high prices, high interest rates, and high housing prices, and "affordability" has become the core source of dissatisfaction. The core theme of 2026 may not be "stimulating an overheating economy", but rather easing the pressure of living costs. This brings three implications for U.S. market investments: first, the potential for index valuation expansion may be limited, with increased volatility; second, sectors with strong monopolies, high pricing power, and high profit margins face higher policy risks; third, cost-benefit industries are relatively advantageous and are more likely to become the direction of capital allocation. The main points of Zhongjin are as follows: 2026 is a midterm election year in the United States, which is a very important turning point for Trump. Currently, the Republican Party has only a slight advantage in the House of Representatives. Once they lose the majority, resulting in divided government, not only will the government's governance capacity be weakened, but Trump himself may face the risk of impeachment. Unlike in the past, the focus of this round of elections has shifted to the real-life pressures brought about by high prices, high interest rates, and high housing prices, with "affordability" becoming the core source of dissatisfaction. In this context, simply pursuing economic growth or asset price increases no longer has the highest priority, and responding to the tangible feelings of the people becomes more critical. In recent years, the high level of prices in the United States has exerted lasting pressure on low- and middle-income groups. The housing sector is particularly prominent: as house prices and mortgage rates rise simultaneously, the affordability of housing for families has significantly decreased since 2022. At the same time, residents' debt repayment pressure has increased with rising interest rates, compounded by tariff policies and the impact of AI technology on the labor market, further magnifying the economic anxiety of ordinary families. This also means that even if macroeconomic data are robust, voters may still feel burdened subjectively. When affordability becomes the core goal, policy orientation also changes accordingly. Compared to traditional macro policies, administrative intervention measures that directly affect prices, interest rates, and business behaviors are more likely to be included in policy options. Recently, Trump has frequently taken action in the housing, finance, and electricity sectors, and has continued to pressure the Fed to cut interest rates, reflecting a clear logic: when corporate profits, financial capital returns, and voter emotions conflict, policy balance is more likely to tilt towards votes, by compelling capital to "give in" to garner support. The market often subconsciously assumes that economic policies in election years will always be favorable to asset prices. However, this assumption is not always true. Historical experience shows that once affordability becomes the dominant issue, policies are often more aggressive and more likely to disrupt the market. Since the beginning of the year, the aforementioned intervention measures have raised investor concerns: the stock market as a whole has been volatile, and the steepening of the bond yield curve reflects market concerns over related policy risks. At the same time, the Fed's stance has become cautious, and rate cut expectations have been delayed. Against the backdrop of increasing external pressures, monetary policy must not only respond to economic conditions, but also consider defending its independence. Therefore, the core theme of 2026 may not be "stimulating an overheating economy", but rather easing the pressure of living costs. This brings three implications for U.S. market investments: first, the potential for index valuation expansion may be limited, with increased volatility; second, sectors with strong monopolies, high pricing power, and high profit margins face higher policy risks; third, cost-benefit industries are relatively advantageous and are more likely to become the direction of capital allocation.