Blain’s Morning Porridge 21^st, Sept 2026 – US Midterms? Maybe not as bad as we fear?

“The guide is inaccurate but cheaper and features the words DON’T PANIC in large friendly letters on its cover.”

At the back of all traders and investors minds is the question: “just how bad might the US Midterms be?” Relax. Things are never as bad as we fear, (though seldom as good as we hope). The mid-terms will be consequential, and no matter what the result are unlikely to do much to reverse the long-term decline of the US Treasury Market – the single most important market on the planet.

LINK TO PODCAST

Key Takeaways:

• Whoever wins the US Midterms is unlikely to ameliorate market concerns around US deficits, inflation, the structure of the Treasury market, nor increase confidence in the long-term outlook for stocks.
• The US will likely be gridlocked – Trump Lame-Ducked, and increased lawfare and polarisation. Expect shutdowns, budget confrontations, and delays to effective policy.
• The results will be closer than expected – the MAGA Republicans will outspend the Democrats 3/2 in attack-advertising concentrated on the last 6 weeks.
• What Trump does with “his money” will be interesting – does he spend it on candidates, or keep it to leverage his influence ahead of 2028?
• The consequences on global markets will be substantial. As conflict risks rise, the USA will be distracted, supporting new alliances and trade deals.
• The market to watch will be US Treasuries. It will set the tone across more speculative assets from AI to Private Capital Markets. Even as interest rates rise, bonds may be a more stable asset class than equities.

It’s just 6 weeks to the US midterm elections. How will the result set sentiment and direction for the future path of markets? It’s probably a good idea to be figuring it out today, rather than being swamped if markets turn fruity post Tuesday, November 3rd.

On one level, the bond and stock markets will carry on as before on – nervous. The AI infrastructure boom (or is it bust?) will likely still dominate flows, and on the corners will still be folk concerned about energy costs, rising inflation, global trade, alliances and supply chains, wondering if its time to increase gold holdings. As uncertainty mounts, the cockroaches of the crypto-sewer will emerge from the dung heap trying to sell us fantabulous promises of enormous wealth based on their “greater fool” grasp of hucksterism, and marketing lies to the gullible. How markets react to the midterms will be a matter of scale and shock.

The reasons the Democrats are ahead in the polls is partly because that’s what normal in US politics. Whoever came up with the idea of House and Senate elections between presidential election was a genius. In normal times the Midterms put the onus on the President to be “good and effective”, so they aren’t left crippled just 2 years after they take office. These are not normal times. Donald Trump is not a normal President. This time… it’s different.

Nothing will change… but everything changes…

At present the probability markets and polls say 85% chance the Democrats take the House of Representatives. There is now a 55% they could all take the Senate. It seems likely Trump will therefore find himself “lame-ducked” to a greater or lesser effect – which could trigger some very, very, very Donald Trump moments and comments.

However, I suspect the results may be far closer than the noise suggests.

I don’t have the time, (nor a doctorate in US electoral financing law), to explain how it works but US elections are all about money – and it’s very, very complex. MAGA Inc itself has over $400 mm, which Trump has declared “his money” (which may cause serious legal ructions). The Republicans have another $300 million in PACs and committees. In total they have about 40% more than the Democrats. They have received extraordinary amounts of funding from AI firms and the Crypto-sector. At present the Reds (Trump’s MAGA) have about £350 mm more to spend in the next six weeks than the Blues (The Democrats). Boom time for social media and advertising revenues.

(The $400mm MAGA Inc fund that Trump has identified as “his money” actually belongs to an independent Super-PAC subject to campaign finance rules. It can support candidates and election litigation but is not Trump’s personal legal fund… whatever he thinks.)

MAGA strategists figured the best way to spend the money would be for Trump to fund a Blitzkrieg of advertising in the last few weeks of the campaign, calculating the attention span of voters is short. MAGA supporters and the critical swing-voters will only be distracted for a limited time from inflation, rising gas prices, and the War on Iran. The ad campaign will therefore force-feed swing voters with a diet of attack-ads, calling the Democrats Socialists/Communists, set to destroy ‘Merica, dangerous to wealth, happiness and prosperity, and determined to enforce gender-surgery on every American kid.

(According to intelligence sources, MAGA is also likely to benefit from massive foreign disruption and destabilisation through misinformation and fake news. The proliferation of fake-news sites claiming to be trusted news sources feeding a diet of AI generated celebrities attacking the Democrats is rising. The Russian troll and disinformation-farms are Trump favourable – figuring it’s the obvious way to ferment instability and distrust. When American voters hear one of their favourite actresses describe how Biden’s policies forced her children into gender reassignment, it sticks – even through its entirely fake, dishonest and AI generated.)

Let’s assume the vote is close, but MAGA still loses Congress. Most folk expect Trump would go ballistic, issuing streams of invective, accusations, demands, and shouty posts from the Oval Office across Truth Social. Many US political commentators fear Trump will use much of that vast war chest assembled in the PACs he controls to fund court battles contesting election results, alleging voter election fraud and whatever else the fertile minds of his advisors can cook up.

Trump is not stupid and he is cunning. He may decide he’s better off holding on to the money to give himself greater leverage in his potential successor as MAGA presidential candidate.

What if… Trump simply ignores the result and declares he’s won the Midterms? He acknowledges the vote, saying losing the House isn’t unusual for a Mid-term President, and he lost it better than any President in History, or some such hyperbole. Trump declares he’s the real winner because he lost by less than was expected. He settles down to a couple of years of blaming the Democrats for everything, hurling choice insults at them, building his legacy with meringues gilded in gold monuments, while ensuring all eyes remain focused on him, letting him set the agenda for choosing his potential successor – Vance, Rubio, A.N. Other, or heaven forbid… one of his family! He will continue to run the Presidency as an Imperial Court, keeping the Tech Billionaires, Crypto Kingpins and big money circulating around him, while letting the Democrats struggle to agree on a candidate for the 2028 Presidential cycle. (That will be… interesting.)

The outlook will be for even greater division and polarisation between Blue and Red politics – which will greatly concern global markets. The threat of electoral lawfare will become even more prevalent – distracting America from being the USA. In such an internally focused environment, how focused will the US be on escalating crises in the energy markets, the hegemonic struggle with China and rising risks from conflict elsewhere?

Ukraine is likely to dominate the news as the winter deepens into an assault on civilian energy. The instability and the likelihood of a further oil-shock created by the half-baked Iran War is spreading as the Houthi’s expose Saudi vulnerabilities – that could turn into a major shock. The Danes are shaking their heads at Trump’s claim to have secured Greenland – news to them and the locals. The threat of extreme right-wing political gains in Europe (look at the German elections) will deepen a global sense of rising crisis.

Trump’s tantrums, insults, and antics in the fields of free-trade and alliances, mean it’s little wonder a new post-America world is emerging. 2 years ago, everyone wanted to show their fealty at the Court of the American King. Few nations are fawning upon him now. It’s now a political vote winner to snub him in many countries. (It’s Trump they despise – not America) There will be even fewer nations willing to dance to Trump’s tune by Mid-November. Mark Carney of Canada is hammering out a new coalition of Middle Nations at the UN General Assembly this week.

So, as the tension and drama around the White House throne room continues – what will follow?

The most important market on the planet is Treasuries.

Global buyers of US bonds fund America – but for how much longer if the US is increasing self-obsessed? A Democrat Congress curbing further tax-giveaways and unfunded promises like the $5k Trump Victory bribe would be positive, but consequential. The main item on the US shopping list is defence – rebuilding a tired fleet, giving the Airforce new aircraft, re-equipping a new army for the post Ukraine reality, and speeding up the repletion of empty missile magazines, but where will the money come from?

At a time when increased polarisation, the emergence of new non-US alliances, and de-dollarisation is occurring – who is going to fund the Treasury market? That’s not just a Trump problem – but the critical moment is occurring under his watch.

If US yields have to rise, and the Treasury market continues to switch to shorter maturities, increasing the frequency and thus the size of refinancings… then the implications for the rest of the economy and the stock market’s sustainability at higher rates becomes an increasing concern.

It will impact the costs of the AI build-out, focusing our attention on returns. The rising risk-free rate will impact the appetite for speculation. And it will focus markets on liquidity – meaning illiquid markets, particularly the private capital markets could come under pressure. (My view there is most private credit deals will remain money-good in any normal scenario, but private equity markets could prove a problem as they’ve been founded in the wall of speculation that drove markets through the 2010s!)

More on this in coming weeks, but got to get to the station…

Out of time – which like trains – waits for no man…

Bill Blain

Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital

Meanwhile, don’t forget about my new book: The Battle for Hamble

You can read a review on the Society of Professional Economist’s website here.