Back in July of 2024, I wrote about uncertainty – specifically I postulated that using uncertainty as an excuse not to act was a flawed approach to investing. The future is never certain and as such simply bandying the word uncertainty around as if that constituted a robust approach to investing was rather undesirable. A certain future is a future already appropriately discounted by the market – there is no alpha down that road.

As we start 2026, there is already more than whiff of this dynamic in the air. Specifically, and particularly, this must be said with respect to the words and deeds of the President of the United States of America, Mr Donald J Trump.

Nothing that has happened in the first few weeks of this year, nor indeed in the roughly 18 months since I wrote the original piece on uncertainty, has changed that assessment. When times are assessed to be more uncertain than usual, the correct course of action for investors is simply to demand more compensation for that heightened uncertainty. Of course, there are numerous subjective judgements inherent in that statement but, and I hate to be the bearer of bad news, that’s the job.

All that being said since we returned from the festive break, stuffed full of turkey, mince pies and chocolate (speak for yourself, I hear the Gen Z-ers shout – kombucha and protein bars for them, I suppose), there has been a small flurry of announcements and pronouncements from the White House. These, it must be said, have unequivocally raised that uncertainty bar. So, let’s take a closer look and see what practical investment conclusions we might be able to draw.

At the back end of the year, my colleagues in our award-winning multi-asset team asked me to opine on the upcoming US midterm elections. Specifically, my task was to offer my view on how the elections might impact financial markets through the first half of the year. My starting point for this sort of analysis has been greatly informed by the work of Philip Tetlock in relation to his Good Judgement Project and the superb book it spawned – Superforecasters. My process is to consider a historical baseline and then make subjective adjustments to that baseline considering the specifics.

The first thing to say is that the historical record shows an overwhelming bias towards incumbents suffering at the midterms. Losing control of one or both chambers of Congress is very common indeed.

Next, I ran some analysis to look – in an objective, statistical sense – at how markets have historically behaved in midterm election years and how that differs from their average behaviour over the non-midterm years.

The results showed that midterm years have tended to generate lower growth and inflation in the US economy alongside higher volatility (both implied and realised), with lower returns for US equities and the US dollar. So that is the unqualified baseline – pressure on incumbents and not such a happy year for risk markets.

So how might we subjectively assess the potential effects of the current, specific situation, as we move through 2026 into election season.

I concluded that it is highly unlikely that we would see any meaningful legislation passed in 2026. The One Big Beautiful Bill Act (OBBBA) was passed in 2025 and will have its maximum impact in the first half of 2026. That will manifest as a fairly significant tailwind for the economy (tax cuts for individuals and investment incentives for businesses) at the expense of a bit of budget deterioration (what else is new). However, the Republicans have wafer-thin majorities across both the House and the Senate and given the incredibly wide partisan divide, it stretches credibility to believe that Democrats (and maybe even moderate Republicans) would want to give the president any major legislative ‘wins’ ahead of the election. The situation could be particularly difficult in the Senate, where 60 votes are needed to overcome the dreaded filibuster, a tactic to delay or block legislation through extended debate. While the difficulty the president is likely to face passing legislation is not necessarily unusual, particularly in recent years, the extent to which it is true today is probably as significant as it has ever been.

So, if Trump cannot boost his and his party’s popularity with fiscal giveaways – what can he do? In a sense, we are back to where we were in January 2025 – the policy options left open to the president are those he can implement purely using his executive powers. Broadly speaking that has tended to be foreign policy. Material boosts to public popularity through foreign policy actions tend to be quite rare and have been most powerful when they have come in the form of winning wars. As I considered this reality in December 2025, I concluded that, while Trump may attempt to boost his popularity in this way, the options available to him were not likely to be particularly effective and, most importantly, in the interim were not likely to have a massive impact on markets.

Looking specifically at markets, the most obvious way in which the baseline might be adjusted would be in relation to the starting valuation for equity markets. Rarely have US equities been as expensive on a simplistic price-to-earnings ratio basis. If anything, I concluded – the risk of disappointing equity market performance must be a little heightened.

My conclusion was thus that the baseline was probably a reasonable guide – equities are expensive, but there is a fiscal boost in the pipeline and the president’s policy options to significantly juice the economy are probably pretty limited.

By the second week of January, I felt obliged to follow up with my multi-asset colleagues with a teaspoon of humility.

The analysis was not bad or wrong, but maybe it lacked imagination. The range of policies I considered was probably informed too much by orthodoxy and history – including the approximately five years of recent history involving this very gentleman occupying the White House. Since the calendar flipped over, Trump has announced policies or intentions to ban institutions from buying houses, buy mortgage-backed securities in the open market (normally something we would expect to see from the Federal Reserve in the guise of quantitative easing) and cap the permitted interest rate on credit cards to 10%. These direct interventions by a government in free market function would be a resurrection of some of the most ill-advised and ineffective policies of periods such as the 1970s. Theoretically and empirically they are bad ideas doomed to creative perverse incentives and unwanted outcomes. For example, if you cap credit card interest rates, that will simply dry up credit provision to all but the highest-quality borrowers and, most worryingly, create a massive incentive for black market lending. Dealing with symptoms rather than causes is, and always will be, bad policymaking.

On foreign policy, the president has successfully captured a South American dictator in his own palace and brought him back to New York to stand trial for a variety of criminal offences. Using his favoured medium of social media, Trump has also taken to egging on protestors in Iran, intimating that he would be willing to use military force to protect them, should Iranian efforts to stamp out dissent become too aggressive. Both countries have large oil reserves, and both countries are big suppliers of crude oil to China. The geopolitical angle is obvious. Not sure about anyone else, but I did not have either of these moves on my bingo card.

Markets in an aggregate sense appear largely unconcerned. Equity markets have started off the year in fine form across the globe, buoyed by reflationary hopes and the usual, seasonal re-risking after the equally usual December bout of profit-taking. Under the hood, however, these pronouncements have certainly made an impact. Banks and credit card companies saw their stocks fall, as did alternative asset managers who had been significant purchasers of US residential property.

Oil has been volatile, but it certainly has not moved in a way which will, as yet, cause central banks or consumers much additional indigestion.

Thus, my addendum to my multi-asset colleagues was this: whatever range of policies you might be considering for the year ahead – widen it. I have. The current administration is prepared to try just about anything to boost votes come November – particularly with respect to the sorry state in which many consumers find themselves. The necessary compensation for investing in a Trumpian world just went up. Again.

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James Athey is Co-Manager of Marlborough's Global Bond & Global Corporate Bond funds.

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This article is provided for general information purposes only and should not be construed as personal financial advice to invest in any fund or product. These are the investment manager’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.