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The new year is here, and there’s a political dynamic brewing that every trader needs to understand — not because I’m taking sides, but because it’s going to matter for how we position our portfolios.
Here’s the situation. Right now, Republicans hold the majority in the House, the Senate, and they have the White House. That’s full control.
But midterm elections are coming in November, and if you understand the K-shaped economy we’re living in, you can see exactly how this could play out.
A K-shaped economy is a recovery where different groups move in opposite directions at the same time. The part of the K that curves up represents high earners moving higher while the lower part of the K represents lower income people — the vast majority of us — moving lower.
Higher-income households, white-collar workers, and larger firms tend to see stronger job security, rising wages, and higher asset values, while lower-income households, many service workers, and small businesses face job losses, stagnant pay, and greater financial strain.
The idea is that the “headline” economy can look healthy even as a large share of people are falling behind. That’s exactly what’s happening right now.
And when that happens, it ties up what the current administration can do to keep this growth momentum moving forward.
Now, I’m not here to debate politics. In fact, I think policy change has become almost impossible because our system no longer finds a middle ground. There’s no compromise, no bipartisanship, just two sides fighting for control.
And while I think both parties are terrible — just socialists for different groups — what I care about is how policy gridlock affects the market. We’re sitting on nearly $40 trillion in debt with nobody talking about cutting spending.
Why Trump’s Mandate Shifted From Austerity to Pure Growth
Here’s what caught my attention. Trump was voted in on a mandate for change — the whole DOGE and austerity message. But we’ve flipped very aggressively from that to a pure growth beacon strategy. We’re still running deficits at crisis levels, and instead of pivoting toward restraint, the administration decided to go all-in on growth instead.
Maybe that works. Maybe the U.S. really can be the growth beacon of the world. But when you combine that with U.S. valuations at extremes versus the rest of the world, it creates vulnerability — especially heading into a contentious midterm election cycle.
How I’m Positioning for the Midterm Drama
So here’s my game plan. I’m planning to trade aggressively through May, June, July and August — that’s when I’ll be running both my core strategies at full tilt. And part of the reason I’m leaning into these trades now is because my expiration isn’t that far out.
I don’t want to push positions all the way into June or July if I don’t have to. Taking advantage of nearer-term setups just makes more sense in this environment.
But come September through November, I’m shifting defensive and focusing primarily on hedging strategies. The midterm drama is going to heat up in October, with elections in November. That’s when uncertainty peaks, and uncertainty creates volatility. If there’s a big swing in control, the market’s going to react — and I want to be positioned for that possibility rather than caught off guard.
This isn’t about being bearish on America or betting against the rally. It’s about understanding the political-economic cycle we’re in and adjusting my strategy accordingly. The summer months should be strong, but as we roll into fall, I’m going to be a lot more cautious about how much risk I’m carrying.
That’s how I’m thinking about the back half of this year — aggressive when the path is clear, defensive when the political winds start shifting.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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