Generally speaking, the three months after a general election is a relatively good time. If there are no economic issues three months later and the Federal Reserve continues to maintain a trend of monetary easing, then risk markets may perform even better.
However, if signs of a recession appear in the U.S. economy, it is very likely that after the election, we will see the occurrence of the 'final drop,' with the focus still on whether the economy will enter a recession.
Based on current trends, the Federal Reserve's interest rate cut cycles typically last between 16 to 18 months, meaning that the third and fourth quarters of 2026 are likely to welcome a low interest rate cycle. During this time, if the U.S. economy enters a recession, it cannot be ruled out that the Federal Reserve will employ QE to stimulate the recovery of the U.S. economy, which is true monetary easing. In addition, other measures such as balance sheet expansion will greatly help increase liquidity.
However, if the U.S. economy does not enter a recession and instead achieves a soft landing or no landing at all, then QE may not occur, although the probability of balance sheet expansion still exists. More importantly, November 2026 will be the midterm elections, and like the general elections, midterm elections have a strong positive impact on risk markets, especially since this midterm election is likely to mark the end of the shift in U.S. monetary policy from tightening to easing.
Whether from the perspective of political situations or liquidity, the period from 2022 to 2024 is incomparable, and it is very likely to mark the beginning of a new bull market cycle.
