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The market had long priced in a Republican defeat in the midterms.
The market had long understood where Democrats stood on the AI industry.
Over the past few weeks, the market had even anticipated that Republicans would lose both chambers of Congress in the midterms. The data on Polymarket could not have been clearer. And the market had pre-adjusted for this outcome, partially baking those expectations into stock prices.
Even so, the market underestimated the scale of the Republican defeat and the Democrats’ landslide victory - not just in the Congress, but also at state governor level.
That is why the market is adjusting violently. If you believe valuations for the US AI sector differ in a world with Trump versus one without him, what the market is doing now, is stripping out at minimum the entire “Trump premium.”
This process is brutal, marked by panic and a stampede for the exits.
In 1980, Jimmy Carter lost the presidential election over the Iran hostage crisis.
In 2026, the Republican Party lost the midterm elections because of Trump’s war with Iran. Moreover, members of Trump’s cabinet, such as J.D. Vance and Marco Rubio are likely to lose the 2028 presidential election for this very reason, should they choose to run.
Take away: don't meddle with Iran.
History is full of irony.
In the 1980 election, Ronald Reagan, riding the fallout from the Iran crisis, launched the modern American conservative revolution. Its influence persists to this day and helped to shape Trump’s political movement.
In the 2026 midterm elections, the war with Iran brought an effective end to this contemporary American conservative revolution - MAGA.
The Iran war may even burst the AI bubble.
This Middle East country has been shaping American history, in a very distinctive way.
Of course one may extend this observation to include another Middle East country - Israel.
JD Vance is the "Khrushchev lurking beside Trump" . (note: Trump as Stalin)
He is merely using pollsters and America First opinion leaders as mouthpieces to voice views he has long held - his positions on Israel, the Middle East, among others (including Ukraine).
If necessary, he will have to repudiate Trump altogether (at earlier stage of his political life, he called Trump America's Hitler)
He now understands that staying hidden any longer carries too great a risk, and it will sink his political future. He has to reveal his true allegiance ahead of time.
Any New MAGA or America First movement will have to purge people like Laura Loomer first.
People have no idea what’s coming to our country and how bad things will be for everyone in America.
You get what you vote for.
Have you seen this lunacy? @elonmusk
The four points raised by Mr JD Vance boil down to the same core issue, all traceable to the Iran War.
Here is the logic. By failing to uphold America First, the US allowed Israel to shape its foreign policy, dragged itself into the Middle East, and launched the war against Iran. And waging that war inherently violated the principle and interest of America First. The inflation and cost-of-living pressures voters face, are all consequences of the Iran war.
And at the root, the debate circles back to America First.
The obvious question follows. Is America First not the foundational pillar of Trump’s MAGA movement, in the first place? Where did things break down?
The answer lies with Israel and the Israel lobby. Apart from Mr Elon Musk, Mr Trump’s largest donors come from pro‑Israel lobbying groups (all public information), and Israeli interests have dominated American foreign policy.
Hence the solution being: only a clear break from Israel could make America First viable again.
JD Vance’s remarks draw attention because the arguments he advances, are the very positions long championed by "America First" figures (as opposed to the more Trumpian label of "MAGA") who previously split publicly with Trump, including Tucker Carlson, MTG and Thomas Massie. Trump once dismissed and derided their views, insisting that he had the exclusive authority to define what America First means.
Put simply, JD Vance is distancing himself from Trump. He seeks to redefine "America First", return the movement to its original mission and value, and attempt to seize the leadership of the MAGA course and America First coalition. And it is important to note that this version of America First explicitly rules out Israeli influence and stands independent of Trump.
This separation from Israel also means this Republican platform will no longer receive generous funding from pro‑Israel lobbying groups. Where will he raise money instead? From tech‑right who back AI and data center projects? You need (a lot of) money to fund elections. Now that remains unclear.
Still, JD Vance understands clearly that inaction now will sink his political career.
It remains to be seen how Trump will respond to this defiant separation from Vance. Will he tolerate it, or even quietly encourage it? Or will he fight back, just waiting for the right moment? Let's see.
One of the things the data analysts on our side obsessed over was "composition"—whether the electorate looked close enough to 2024 for Republicans to win. And despite polls that showed a Democrat blowout, the data kept on telling us the same story: in some states turnout was merely OK, in other states it was downright amazing, and in no state was it catastrophic. There was a genuine sense of optimism on our team: our people were showing up.
So, I asked the smartest data guy I know, does that mean we're going to shock the world? "No," he told me. "We might do better than the polls suggest. But the data is telling us that a lot of Trump/Vance 2024 voters are pissed and planning to vote for the other guys. Our voters are turning out, but they may not vote for us."
Well, that looks prophetic now. Our voters did show up. In Florida, for example, the electorate was 9 points more Republican than Democrat, just a couple points worse than 2024. Undoubtedly there were places we could have done better on turnout. But the main problem is not turnout. The main problem is that many people who voted for Trump/Vance in 2024 voted for Democrats in 2026.
There will be a lot of infighting and arguing over what happened and why that is. One of the pollsters I really respect told me that our economic messaging wasn’t sharp enough down the stretch. I’m sure that’s true.
But the real reason we lost is obvious to almost everyone.
Another pollster—one of the smartest people I know in politics, told me yesterday we’d lose the generic ballot by 13 points. I felt negative going into Tuesday, but even I was shocked by this. In his polling, he saw that a lot of Trump 2024 voters were angry and planning to vote for Democrats. He asked those voters who had abandoned us what would cause them to come back on our team. The top four answers, accounting for nearly all of the responses were:
1) End the war
2) Focus on cost of living/inflation
3) Put America First
4) Change our relationship to Israel
Our voters showed up. And the above four reasons are why many of them voted for Democrats. This is according to a pollster who nailed the results. While many spent Monday attacking Rachel Campos Duffy for calling for a diplomatic resolution to the conflict, it turns out her political advice was sound. (She’s also a great person.)
In the next few months, there's going to be a lot of gaslighting. Expect to hear any number of establishment politicians say the solution to our woes is amnesty. I'm open to the idea that we should change enforcement—by focusing more on businesses that hire illegal labor, for instance. But anyone pushing amnesty is lying to you.
The reason we lost is the war. The president himself said so last night.
If you'd like to argue it was worth it, that losing the Senate for the next 6 years was worth it, then do so. Argue it was a worthwhile cost to pay. Agree or disagree, that's at least honest.
But everyone knows why we lost. And any honest conversation about where we go from here must start there.
I remain hopeful about our country. To the people who are pissed off and want to say, “I told you so”: you’re right, you did tell us so. Take that energy into electing Republicans who share your worldview. To the people who are just pissed at the results, you should be. Let’s take that anger and get back to the work of saving our country.
The 2026 midterm elections make it abundantly clear that Trump is now the BIGGEST LIABILITY for the Republican Party and the conservative movement. Anyone with political aspirations who ties themselves to Trump, will face defeat. It is obvious that the Republican Party’s next priority is figuring out how to decouple from this dominant figure and transition smoothly to the post‑Trump era.
A peaceful separation would be the ideal outcome. Yet the process could also end in bitter infighting and an open rupture, as seen with America First figures such as Tucker Carlson, MTG and Thomas Massie, who broke away from the MAGA camp after the Esptein affairs and Iran war.
The heaviest burden in this transition will undoubtedly fall on prospective 2028 presidential contenders including JD Vance and Marco Rubio, who will face many, many difficult and painful choices in the next two years - in fact, a couple of months from now.
To those who want to understand China from outside.
Many people now say that China’s industrial development is so strong that the future seems to belong to China. Yet the stock market remains weak and investors have little confidence. What does this suggest?
In fact, China has two choices.
The first is to completely lift all capital controls and fully link China’s currency and capital markets with those overseas. Global capital would flood in and gather - especially capital seeking to hedge against risks from the United States, whether geopolitical, geo-economic, or related to technology and industry. The benefit would be that capital markets would be activated, the stock market would rise, and capital could support China’s industrial development. The downside would be that China’s control and dominance over the money market and the financial system would be weakened, making the country more fragile. In other words, financial sovereignty would be reduced. And if a bubble were to burst, the consequences would be very severe.
The second is to keep the existing capital controls for the sake of safety. This would limit the inflow of global capital and prevent it from gathering. The result, of course, would be that the stock market performs poorly and is unlikely to reach or even approach the level of the American market. At the same time, the technology industry and its investors would be unable to enjoy the premium and upside that freer capital brings, which would to some extent slow the development of these industries. The benefit, however, is that capital controls would help China maintain financial and monetary sovereignty and minimise external risks as much as possible. These advantages would become clear if a bubble were to burst.
What choice will China make?
If one were to conduct a hypothetical “survey” of Chinese officials - those responsible for the relevant industries, sectors and functions, or anyone in the government system who can put themselves in the position of such officials and reason about their policy considerations - one would most likely find that an overwhelming majority would choose the SECOND option.
This reveals a safety-oriented, bottom-line mentality in which avoiding systemic risk is the overriding priority. It is the risk preference of the Chinese system and its decision-makers. The outcome is that some upside is ”sacrificed“, but large downside is also avoided. When the stock market is rising strongly, these characteristics remain hidden. But once a global financial shock occurs, they become apparent.
Hence, the primary vehicle for supporting industries is not global capital market, but a domestic financial market combining domestic commercial banks and domestic stock market. Beijing has sufficient influence over market participants, and it can guard against risks to the greatest extent while supporting industrial development.
The pessimism in Chinese finance is spilling from tech-heavy stock-market benchmarks into broader indices. In the middle of an AI boom, why are the country’s investors so bearish? bit.ly/4yKArXf
To those who want to understand China from outside.
Many people now say that China’s industrial development is so strong that the future seems to belong to China. Yet the stock market remains weak and investors have little confidence. What does this suggest?
In fact, China has two choices.
The first is to completely lift all capital controls and fully link China’s currency and capital markets with those overseas. Global capital would flood in and gather - especially capital seeking to hedge against risks from the United States, whether geopolitical, geo-economic, or related to technology and industry. The benefit would be that capital markets would be activated, the stock market would rise, and capital could support China’s industrial development. The downside would be that China’s control and dominance over the money market and the financial system would be weakened, making the country more fragile. In other words, financial sovereignty would be reduced. And if a bubble were to burst, the consequences would be very severe.
The second is to keep the existing capital controls for the sake of safety. This would limit the inflow of global capital and prevent it from gathering. The result, of course, would be that the stock market performs poorly and is unlikely to reach or even approach the level of the American market. At the same time, the technology industry and its investors would be unable to enjoy the premium and upside that freer capital brings, which would to some extent slow the development of these industries. The benefit, however, is that capital controls would help China maintain financial and monetary sovereignty and minimise external risks as much as possible. These advantages would become clear if a bubble were to burst.
What choice will China make?
If one were to conduct a hypothetical “survey” of Chinese officials - those responsible for the relevant industries, sectors and functions, or anyone in the government system who can put themselves in the position of such officials and reason about their policy considerations - one would most likely find that an overwhelming majority would choose the SECOND option.
This reveals a safety-oriented, bottom-line mentality in which avoiding systemic risk is the overriding priority. It is the risk preference of the Chinese system and its decision-makers. The outcome is that some upside is ”sacrificed“, but large downside is also avoided. When the stock market is rising strongly, these characteristics remain hidden. But once a global financial shock occurs, they become apparent.
Hence, the primary vehicle for supporting industries is not global capital market, but a domestic financial market combining commercial banks and the stock market. Beijing has sufficient influence over market participants, and it can guard against risks to the greatest extent while supporting industrial development.
Re: advanced technologies, from AI, automation to the infrastructure underpinning them, are by their very nature, tech-intensive and capital-intensive. They cannot possibly generate an equivalent amount of labour demand. This is in fact a commonplace, hardly requiring an economist to argue the point.
Yet it is precisely the direction in which society is heading. Whoever declines or unable to develop science and technology will fall behind in the contest and ultimately be made to pay for it: a traditional economy reliant entirely on manual labour can scarcely hope to compete with a future economy built upon robotics and automation - a blow delivered from a higher competitive dimension. Developing technology, hence, is no mere "choice" but an imperative.
The problem lies NOT in the INVESTMENT itself, but in its DISTRIBUTION: how the state/society should intervene to ensure that the vast body of working people can share in the gains of capital-intensive technological change. As an economist, Paul Krugman offers no answer. The socialist and communitarian tradition, however, supplied answers long ago.
In short, you use technology to make the cake bigger, and use politics and policies to wisely distribute the cake.
Paul Krugman: Will AI Crowd Out Jobs? paulkrugman.substack.com/p/w…
Re：the author Tom Nichos, is an establishment commentator (Never Trump Republican who now supports the Democrats).
This piece captures the total astonishment and indignation of America’s elite at Trump’s abandonment of Ukraine and efforts to repair relations with Russia. Trump’s conciliatory course toward Moscow in fact enjoys a certain degree of popular support at home (the America First and MAGA camp), yet it commands little assent among elites of either party and meets formidable resistance.
The author brands Trump with the charge of “abandoning the Western order.” But in reality, what Trump seeks to bury, is merely the post-1945 American-led Unipolar Rrder—the project of “liberal hegemony.” He and his associates (from Steve Bannon, JD Vance to Elon Musk) holds that the United States must place its own interests first (when it does not come to Israel!), and that European civilisation is a spent force. To preserve America’s standing, salvage white civilisation, and confront China, they believe the United States must somehow align with Russia, - a fellow White Christian civilisation of common stock.
Thus, the order Trump intends to dismantle is only the post-war “New West”, so as to return to the "Old West" of the imperial and colonial age. It is intriguing that the establishment elites across the Atlantic could not understand this rather simple logic.
theatlantic.com/ideas/2026/1…
Trump ditched “America First.” Truth is, he never had a core to begin with.
The populist pitch was always a scam to bank political capital. After winning in 2024 he got drunk on the victory, rushed into a war with Iran, and the mask came all the way off. The MAGA crowd that put him there is now falling apart.
What comes next needs someone who can actually carry ordinary people’s populist anger. The point is answering simple demands from regular people. A lot of that already lives in right-wing “America First” and left-wing economic populism. The next leader could come from either side. Whoever grabs the vacuum after Trump wins. nytimes.com/2026/10/08/us/el…
After being bullied and alienated by the United States, U.S. allies and partners have been trying to seek autonomy - from Canada to Europe, from the Middle East to South Korea. They found themselves a new multipolar world, and the need to reposition themselves globally, in particular their roles in China-U.S. relations. This is also what their domestic audienxe want.
There is only one exception: Japan.
Japan does not seem like a normal country. It completely follows, trails behind, and clings to the United States like a running dog. There is only one explanation: Japan once suffered U.S. atomic bombings, which left it psychologically and emotionally no longer a normal country.
What is tragic is that Japan has failed to correctly recognize that the world is undergoing a multipolar order and that American hegemony is declining. It is still living in the geopolitical environment of 10 to 15 years ago, or even 20 years ago. It has not realized that it needs to reposition itself to gain global respect, and it has to reset its relationship with China in order to seek its own stability, development and prosperity. Insteas, it is still provoking China on the Taiwan issue, believe that such will make its Master appreciated, while the biggest interest for the US is avoid a conflict in Taiwan. This failure of strategic recognition from Japan's side is truly pathetic.
For different reasons, the three Sinosphere nations are abandoning the greatest strength of Chinese characters. Among them, Japan, which indeed retained a large number of Chinese characters, finds itself in the most lamentable predicament.
Navarro has long been sidelined within the White House. His rhetoric largely reflects personal conviction and idiosyncrasy rather than the Trump administration’s actual trade stance toward China. And after years of attritional tariff warfare, Trump has in effect lost the trade contest with Beijing, and the two sides have effectively entered an indefinite truce. Compounding this, the Supreme Court has stripped him of the authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA), leaving the White House with few tools left to escalate a trade war.
Yet Navarro’s views still carry some weight among U.S. trade hawks - unable to compete with China’s industrial strengths, they resort to smearing normal global trade per se as a “scam.” Needless to say, this changes neither the competitiveness of Chinese manufacturing nor the realities of global value-chain specialization. In the end, rhetoric as such will amount to little more than empty words.
economist.com/finance-and-ec…
There is an enormous cognitive gap between the US and Iran regarding the stage of the war. The US views the MOU as the starting point for ending the conflict, while Iran sees it as a breathing space to rearm and regroup. There are two reasons for this:
1) the assessment of earlier outcomes. Iran believes it has achieved a strategic victory, whereas the United States refuses to acknowledge that it has suffered a strategic defeat. Such a wide cognitive gap typically means the two sides will still need to continue confronting and bargaining until a clear winner emerges and one side yields.
2) the two sides' understanding of the conflict itself. Trump genuinely wants to withdraw and secure a face-saving outcome; he also assumes Iran wants to quit while ahead, allowing both sides to tacitly pause hostilities. On the Iranian side, however, there is genuine disbelief that the US intends to exit - ceasefires and negotiations are seen merely as pretenses, with a larger war still ahead. Today’s Iran has been thoroughly “ignited” and activated; the mainstream orientation points toward radical confrontation, and the country as a whole has fallen into a groupthink trap that appears difficult to escape. Trump, meanwhile, lacks both the capacity and the willingness to help Iran allay its suspicions, gradually build trust, and return to the path of peaceful negotiations.
This has locked both sides into a deadlock. The result is that the Gulf states and the global economy will foot the bill together.
wsj.com/world/middle-east/ir… via @WSJ
Trump and the White House are giving full‑throated support to Big Tech and AI capital, which are pouring massive sums into lobbying pro-AI politics, deploying a variety of rhetoric and narratives - such as great‑power competition - to capture regulation. Over the next few years, passing large‑scale wealth‑redistribution schemes at either the federal or local level in the United States will be nearly impossible.
One plausible outcome, however, is this: the AI‑bubble bursts. The government steps in with bailouts, somehow becomes major shareholder in AI/tech firms, and thereby sets off down a path toward public ownership and citizen dividends - albeit on an initially modest scale.
nytimes.com/2026/08/16/busin…
