2026: Trump's bad year?

The core reason to be more constructive on the Yes side is that the bear case does not require one dramatic collapse; it can emerge from a cluster of negative developments that are already visible. Courts are actively constraining major parts of Trump’s agenda, including election-related measures and other initiatives, while judges are signaling skepticism toward some prosecutorial and administrative theories associated with his team. That matters because the market’s job here is not to ask whether Trump remains politically powerful in a general sense, but whether 2026 produces a meaningfully adverse year in the aggregate. A year with repeated legal reversals, intra-party resistance, and a weak electoral showing would qualify as a real bear-case environment even if Trump remains dominant in the public narrative.

The political risk is also more tangible than a generic “Trump chaos” story. Republican officials pushing back on his mail-ballot rule suggests his influence is not absolute, and midterm losses would likely be interpreted as a direct rebuke to his leadership rather than a normal cyclical swing. If Republicans underperform in 2026, especially after Trump-centered policy and campaign positioning, that would strengthen the case that his grip on the coalition is fraying. Add in ongoing litigation over tariffs, birthright citizenship, and other contested actions, and 2026 has a credible path to becoming a year of accumulated setbacks rather than victory.

Against that, the No case is still stronger on raw probability because Trump is unusually resilient and can convert setbacks into proof of persecution. Courts blocking initiatives do not automatically create a “bad year” if his base remains loyal and the media environment stays polarized. He also benefits from a very high bar: the event requires the bear case to actually occur, not merely for some negative headlines to appear. That is why I do not get close to a coin flip. Still, the market at 11% looks too dismissive of the combination of legal friction, institutional pushback, and midterm downside. My read is that the market is underpricing how often a presidency can look strategically weakened even while the president retains tactical control.