This week marked a clear shift in the market narrative. While headlines were dominated by geopolitical flashpoints and massive fundraising rounds in Silicon Valley, the most critical development for investors was the crystallization of the political landscape. Markets are beginning to broaden beyond AI, but the driver has less to do with traditional fundamentals and more to do with incentives. Policy is now being driven explicitly by the election calendar.

The Pivot to Affordability

A Fox News poll widely cited in late 2025 and early January 2026 showed that 76% of registered voters view national economic conditions negatively. A Gallup poll in late December showed President Trump’s job approval rating falling to 36%, the lowest of his second term. The drop is largely attributed to voter anger over the cost of living. One of the few unfulfilled promises from his campaign was affordability, which he largely ignored over the past six months. The pivot is now clear. Trump is going to do anything in his power to make life more affordable.

This reality came into focus following President Trump’s message to House Republicans at their lunch at the Kennedy Center. His warning was blunt: win the midterms or risk impeachment. This was not just political theater. It was a signal to markets that the administration views November as an existential event. As a result, affordability and voter sentiment between now and then are the administration’s top priorities.

Housing Interventions and "Strings Attached"

When political survival becomes the objective, policy decisions change. The administration is proving willing to pull every available lever, including unprecedented interventions, to keep growth intact and voters comfortable. We saw this strategy in action this week with a sweeping set of housing initiatives. In a direct bid to improve affordability, the President announced a plan for the federal government to purchase $200 billion in mortgage backed securities through Fannie Mae and Freddie Mac. The explicit goal is to drive down mortgage rates for consumers.

He paired this stimulus with a move to ban large institutional investors from purchasing single family homes. By attempting to reduce competition from Wall Street landlords that push up prices and rents, the administration is clearly prioritizing the sentiment of the individual homeowner over the free movement of institutional capital. From a market perspective, these moves introduce what can best be described as a political put under the consumer economy, but one that comes with increased regulatory intervention. The housing sector caught fire this week, as home improvement and nearly every stock associated with the sector surged. As always in markets, the move higher was extreme. It was as if housing stocks were AI companies. This helped spark a rally in value stocks.

This interventionist streak extended to the industrial base as well. While advocating for increased military spending, the President signed an executive order restricting dividends and stock buybacks for underperforming defense contractors. This nuance is critical for investors to understand. The administration is willing to support strategic industries, but it is attaching new strings designed to enforce accountability and appeal to populist sensibilities.

Energy Realpolitik

Nowhere is this dynamic of support with strings attached clearer than in energy markets. The announcement that Venezuela will ship 30 to 50 million barrels of oil to the US fits neatly into this election playbook. Increasing supply helps cap gasoline prices and suppress inflation, regardless of the geopolitical optics. It is a consumer friendly move designed to reduce economic friction heading into November. At the same time, energy markets are being pulled in the opposite direction by rising geopolitical risk. Escalating unrest in Iran has reintroduced a risk premium that markets are reluctant to ignore. Trump also hosted an energy summit at the White House with major oil CEOs. The promise was that $100 billion would be spent on Venezuelan infrastructure. The issue is that it is not safe on the ground for American workers in Venezuela. That situation is still evolving, and even the best foreign policy analysts do not know how infrastructure can be built without military support. It is an uncertain situation, to say the least.

The result this week was a rally in value stocks. Small cap and mid cap stocks, which have drastically underperformed, moved higher because more of these companies are tied to economic growth and Trump’s push to improve affordability. The recent strength in energy and value stocks reflects a bet that the administration can reflate parts of the industrial economy while keeping energy costs manageable. That balance will not be smooth, and investors should expect sharp moves in both directions. There are still many other levers for Trump to pull, and at some point I expect him to go after health care companies. His playbook is also likely to include taking more control over the Federal Reserve, with the goal of pushing short term interest rates lower.

The Goldman Effect and Private Market Boom

Financials were another focal point this week, with Goldman Sachs standing out in particular. Several clients asked how a single stock could add more than 600 points to the Dow Jones Industrial Average in such a short period. The answer lies in mechanics. Unlike the S&P 500, which is weighted by market capitalization, the Dow is price weighted. A stock trading near $900 carries several times the influence of a stock trading near $150. Goldman’s rally mathematically forces the Dow higher, creating a distorted picture of overall market strength.

That said, this move is not just about index math. Goldman is increasingly being priced not as a traditional bank, but as a key beneficiary of the AI driven capital markets boom. Activity in private markets has been historic, with massive fundraising rounds and eye catching valuations capturing investor attention. Wall Street is anticipating a wave of IPOs that would generate substantial fees. SpaceX is rumored to be eyeing a public listing at over $1 trillion, compared to its current private valuation of $800 billion. This week, xAI raised $20 billion at a $230 billion valuation. That company was started just a few years ago. Anthropic raised $13 billion at a $183 billion valuation. These are just the biggest names making headlines. The amount of capital being raised in private equity is extraordinary. The disruption these companies will create is something to watch closely. It is easy to see why major financial stocks tied to this ecosystem are helping propel value oriented indices higher.

Investment Implications

We are entering a period where policy decisions are explicitly tied to electoral outcomes, and where good news is already priced into several parts of the market. Political support, whether through mortgage backed security purchases or energy supply deals, can help stabilize asset prices in the short term and boost stock valuations. The jobs report on Friday showed only 64,000 jobs created in November. The market did not care, because it is looking ahead to what may benefit from Trump’s next move to boost the economy. In an environment defined by new political incentives and make or break midterms for Trump this year, long term success will continue to come from diversification and maintaining an overweight to equities.

Have a great weekend!

Sources

Fox News Poll (Economic Sentiment): Fox News Poll, conducted by Beacon Research/Shaw & Co. Research, Nov. 14–17, 2025.
Trump Job Approval (36%): Gallup, "Americans End Year in Gloomy Mood," December 2025.
Impeachment Warning: Washington Post, "Trump warns Republicans of impeachment if midterms are lost," January 6, 2026; Anadolu Agency, January 6, 2026.
Housing Stimulus ($200B MBS / Investor Ban): CBS News, "Trump says he wants government to buy $200 billion in mortgage bonds," January 8, 2026; Real Estate News, "Trump kicks off 2026 with 2 major housing-related mandates," January 9, 2026.
Venezuela Oil Deal (30–50M Barrels): PBS NewsHour, "Trump: U.S. to get 30 million to 50 million barrels of oil from Venezuela," January 7, 2026.
Goldman Sachs Stock Price (All-Time High): Investing.com, "Goldman Sachs stock hits all-time high at $920.01," January 5, 2026.
November Jobs Report: U.S. Bureau of Labor Statistics, "The Employment Situation – November 2025," released December 16, 2025.
AI/SpaceX Valuations: Bloomberg / Wall Street Journal reporting on xAI Series E (Jan 2026), Anthropic Series F (Sep 2025), and SpaceX Tender Offer (Dec 2025).

Disclaimer

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