2026 Year-End Review: Politics, AI and the Fed — the Market Is Going Through a "Risk Repricing"

There has been a lot going on recently, and that has directly changed previous expectations for Q4 this year — to the point that expectations about whether the trillion-dollar AI tech bubble will burst have also turned more pessimistic.

Democrats have retaken control of both the US Senate and House, and the Trump administration is about to face a Congress led by the opposition party; NVIDIA CEO Jensen Huang has been caught up in an investigation involving personal relationships, chip exports and national security; the Nasdaq fell 5.56% in a single day after the election and then rebounded quickly; at the same time, US inflation is heating up again, and the possibility of another Fed rate hike this year has re-entered the market's view.

Entering the final stretch of 2026, what the market faces is no longer a simple "year-end rally," but a complex environment in which politics, monetary policy, AI valuations and crypto liquidity are all changing at the same time.

As of November 11, 2026, Bitcoin was around $73,800 and Ethereum around $2,057, while the S&P 500 was still up about 11.3% year-to-date. This shows that risk assets have not entered a state of full-scale collapse, but the phase in which a single narrative alone drove the market higher is coming to an end.

Shift One: Trump's Republicans Lose Both Chambers

Strictly speaking, it is not that Trump himself "lost both chambers," but that the Republican Party lost control of the Senate and the House in the 2026 midterm elections. The Associated Press called both chambers for the Democrats on the evening of November 3 and the early hours of November 4, respectively; Reuters data shows that Democrats gained at least 39 House seats and flipped 7 Senate seats. AP election results; Reuters market coverage.

This means that starting in 2027, the United States will have a divided-government structure of "Republican president + Democratic Congress." Although Democrats cannot freely rewrite policy by bypassing the presidential veto, they can control congressional committees, investigative proceedings, budget negotiations and the legislative agenda.

What the market needs to watch is not the election result itself, but how it will change the policy path:

• AI data centers, power consumption and regulation of tech companies may face stricter scrutiny;
• Negotiations over taxes, government spending, the debt ceiling and the annual budget may become more difficult;
• The Trump administration's room to push a new round of fiscal policy may be constrained;
• Policy expectations for sectors such as healthcare, clean energy and consumer protection may be repriced;
• Congressional investigations may increase compliance and political risks for large tech companies.

The first round of market reaction after the election was very sharp. On November 5, the Nasdaq Composite fell 5.56%, its largest single-day drop in 19 months. The market worried that Democrats might tighten regulation of AI infrastructure and data centers, thereby affecting the capex cycle that has driven tech stocks higher.

But that does not mean "if Democrats control Congress, US stocks will inevitably keep falling." Oil prices subsequently pulled back, easing inflation concerns, and on November 9 the S&P 500 rebounded 2.35% while the Nasdaq rose 2.74%. The market is trading policy uncertainty, not an already-confirmed recession. Reuters market data.

Shift Two: The Jensen Huang Episode Shakes the AI Sector's Trust Premium

As for the talk that Jensen Huang may step down as NVIDIA CEO, no conclusion can be drawn for now; of course, after today the outcome may become clearer.

What has been confirmed: Jensen Huang has acknowledged an extramarital relationship; related reports have further linked the matter to the China chip business and potential foreign intelligence activity. The NVIDIA board has established an investigative committee overseen by independent directors and outside legal counsel.

However, the NVIDIA board has made clear that there is currently no reason to believe national security or company secrets have been compromised, and it continues to express support for Jensen Huang and his management team. Huang himself has also said he will cooperate with the investigation and continue to lead the company. Jensen Huang's open letter; NVIDIA board statement.

Therefore, what really needs to be watched at year-end is not the "resignation rumors" spreading endlessly on social media, but three verifiable questions:

• Whether the independent investigation finds problems involving company secrets, export approvals or national security;
• Whether the US government further restricts NVIDIA's exports of high-end chips to China;
• Whether NVIDIA's customers adjust their procurement or data center investment plans because of political risk.

The impact of this matter is not limited to NVIDIA. NVIDIA is the core asset of the AI capex chain, and once the market begins to question its governance stability, export room or customer demand, stocks related to semiconductors, servers, power equipment, cloud computing and data centers may all be revalued.

As of November 11, NVIDIA's share price was $173.73, rebounding 2.94% that day. This shows that the market has not formed a consensus expectation that "Huang will inevitably resign," but volatility and event risk have clearly risen.

Shift Three: The Biggest Year-End Variable May Not Be Politics, but the Fed

On October 28, the Fed kept the target range for the federal funds rate at 3.75% to 4.00%. Notably, two committee members voted for a 25-basis-point rate hike, which shows that the rate-hike discussion is no longer merely market speculation. Fed October statement.

US October CPI rose 0.4% month-on-month and core CPI rose 0.3%; nonfarm payrolls increased by 165,000 and the unemployment rate was 4.1%. Because the October 2025 government shutdown caused some price data to be missing, the Bureau of Labor Statistics could not publish reliable year-on-year data for most categories, so one should not piece together a "October year-on-year inflation rate" by oneself. BLS CPI report; employment data.

This set of data forms an uncomfortable combination for risk assets:

• The economy and employment are not yet weak enough to force the Fed to cut rates;
• Inflation is high enough to keep another rate hike possible;
• High rates may continue to weigh on highly valued tech stocks and crypto assets;
• If energy prices rise again, inflationary pressure may expand once more.

The last Fed meeting of the year will be held on December 8-9, and November CPI will be released on December 10. In other words, the Fed may need to make its rate decision before obtaining the next full CPI report. This will further magnify the importance of the December meeting statement, economic projections and press conference. Fed meeting calendar.

2026 Year-End US Equity Outlook: Not Broadly Bearish, but Valuation Divergence

The key question for US stocks at year-end is not "will they rise," but whether earnings can continue to support current valuations.

AI and Semiconductors

AI demand has not disappeared because of a single political event. NVIDIA's most recently reported quarterly revenue reached $96.2 billion, up 106% year-on-year, with data center revenue of $89 billion, up 117% year-on-year. Fundamentals remain strong, but the political investigation, export restrictions, power costs and valuation concentration are raising the risk premium. NVIDIA financial report.

A more reasonable approach at year-end is not to simply abandon AI, but to distinguish:

• Companies with real orders, cash flow and pricing power;
• Companies that maintain valuations mainly on forward-looking stories;
• Businesses directly affected by chip exports;
• Businesses that can benefit from demand for power, cooling, networking and infrastructure.

Defensive and Value Sectors

When tech regulation, interest rates and policy uncertainty all rise at the same time, sectors with stable cash flow, manageable debt and lower valuations may gain a relative advantage. Healthcare, utilities, consumer staples and some financial assets may become tools for spreading out tech concentration.

But "defensive sectors" does not mean they will not fall. Highly indebted utilities will still be affected by interest rates, and the healthcare industry may also face price regulation from a Democratic Congress. Investors need to look at specific assets, not just sector labels.

2026 Year-End Crypto Outlook: Macro Liquidity Is Once Again the Dominant Variable

Bitcoin did not show a fully independent safe-haven character after the midterms and the tech-stock selloff. During the risk-asset decline on November 5, US spot Bitcoin and Ethereum ETFs together saw more than $500 million in net outflows, and crypto leveraged positions liquidated more than $1 billion within 24 hours.

This again shows that in short-term stress phases, Bitcoin may still move in sync with the Nasdaq, high-beta tech stocks and global liquidity, rather than automatically moving in the opposite direction.

Optimistic Scenario

If energy prices pull back, month-on-month inflation slows, the Fed holds rates steady and ETF flows turn back to net inflows at the same time, Bitcoin may retest previous resistance zones. Only after risk appetite recovers are ETH and highly liquid major tokens more likely to receive follow-on capital.

Neutral Scenario

If the Fed continues to maintain a hawkish stance without actually raising rates, and political and AI risks do not deteriorate further, Bitcoin may remain in a wide range. This environment is better suited to position control, staged execution and range strategies than to chasing every rebound.

Pessimistic Scenario

If rates are raised again in December, the AI sector sees a second round of selling, ETF outflows continue, or the NVIDIA investigation escalates into a substantive national security and export event, Bitcoin may test lower support again. Less liquid small-cap tokens typically suffer larger drawdowns than BTC and ETH.

How Ordinary Users Should Approach the Year-End Market

The biggest mistake at year-end is to put all assets into a single direction immediately after seeing major news. Political outcomes, corporate investigations and monetary policy are not events that get fully priced in one go.

More practical ways to respond include:

• Separate long-term holdings, trading capital and emergency funds;
• Do not raise leverage just because of the words "year-end market";
• Reduce overly concentrated positions ahead of Fed meetings, inflation data and the results of corporate investigations;
• For US stocks, focus on earnings, cash flow and policy sensitivity rather than just hot topics;
• For crypto assets, watch ETF flows, dollar liquidity and US tech sector at the same time;
• Positions in small-cap tokens should be smaller than in highly liquid assets such as BTC and ETH;
• Pre-set invalidation conditions for each position, rather than only profit targets;
• Keep some cash or stablecoins to capture opportunities amid high volatility.

Final Thoughts

In the final stretch of 2026, the core contradiction in the market has changed.

At the start of the year, investors were focused on how fast AI could still grow and whether crypto assets could continue to attract institutional money; now, the market has to answer harder questions at the same time: How will Democrats regulate tech and AI once they control Congress? Will the NVIDIA investigation escalate from a personal matter into a corporate governance and national security risk? Will hot inflation force the Fed to raise rates again? Can Bitcoin build a more independent capital logic while tech stocks come under pressure?

Therefore, the end of 2026 looks more like a risk repricing than a decisive bull-versus-bear battle whose direction is already settled.

What really matters is not guessing every news headline in advance, but ensuring that the account retains the ability to adjust, exit and reallocate when different scenarios emerge.

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