Donald Trump's approval ratings dip further in 2026. What the polls show

Multiple national polls in mid-February 2026 show President Trump’s approval ratings slipping into net-negative territory (examples: Quantas Insights 43% approve/56% disapprove; Reuters/Ipsos 38%/60%; The Economist 39%/56%), with immigration approval down notably from earlier highs. The article highlights persistent polarization and policy actions (a 2025 government shutdown stalemate, troop deployments in U.S. cities, broad tariffs and aggressive federal spending cuts) that sustain political and policy risk for markets; however, the near-term market impact is likely limited given the polling focus and absence of an immediate policy shock.

Analysis

Market structure: A weaker approval profile increases the odds of populist, trade- and immigration-focused policy moves (tariffs, border enforcement, targeted sanctions) that mechanically benefit domestic defense and heavy-industrial suppliers (e.g., LMT, RTX, NUE) and commodities (copper, steel, oil) while hurting import-reliant retailers (WMT, TGT, NKE) and global supply-chain exposed tech. Pricing power shifts toward domestic producers and commodity suppliers as tariff pass-through raises input prices; retailers face margin compression absent ability to raise prices. In FX/ rates, policy uncertainty + tariffs is a stagflationary mix: upward pressure on commodity prices and USD, ambiguous for 10y yields depending on fiscal path.

Risk assessment: Tail risks include a federal funding shutdown, abrupt tariff escalations, or domestic troop deployments that spike risk premia; any one could move equity IV +200–400bps intraday. Time horizons: immediate (days) – higher intraday volatility and widening credit spreads; short-term (weeks–months) – sector rotation to defense/materials; long-term (quarters–years) – reshoring capex and persistent higher input costs. Hidden dependency: Fed reaction function to CPI prints will determine whether policy offsets tariffs; a CPI >3.5% over two prints will materially raise tightening risk.

Trade implications: Tactical longs: establish 2–3% positions in LMT and RTX (defense) and 1–2% longs in copper (HG futures or COPX) inside 2–6 weeks to capture tariff/reshoring upside. Tactical shorts: trim/short 1–2% positions in WMT/TGT or short XRT (retail ETF) if approval drifts below 40% in 30–60 days. Hedging/options: buy 1% of NAV in 3-month SPX put spreads (5–7% OTM) to protect against event-driven drawdowns; consider 6–12 month call overwrites on defense names to fund carry.

Contrarian angles: Consensus undervalues speed of corporate adjustment—many large retailers hedge FX/inputs and could see earnings rebound within 2–4 quarters, making deep shorts risky past 3 months. If approval stabilizes in the low-40s, markets often rally on predictability; therefore cap short-tenors to 3 months and favor relative-value pairs (long LMT vs short WMT) rather than outright directional market bets. Historical parallel: 2018 tariff episodes produced sharp 6–12 week dislocations followed by mean reversion; prepare for a similar two-stage move: quick risk premium spike then selective re-rating.

Key Decisions for Investors

• Establish a 2–3% long position split between LMT and RTX within 2–6 weeks to capture increased defense/immigration enforcement spending; hedge with 6–12 month covered calls to monetize premium.
• Initiate a 1–2% long position in copper exposure (HG futures or COPX) and 0.5–1% long in XME (metals ETF) to front-run reshoring/material demand; add if copper rises >8% from current levels.
• Reduce exposure to import-dependent retailers: trim WMT/TGT positions by 1–2% and consider a 1% short in XRT (retail ETF) if presidential approval drops below 40% in the next 30–60 days.
• Allocate 1% of NAV to 3-month SPX put spreads 5–7% OTM as event insurance (fund with covered calls on defense longs); if IV spikes >50% above 90-day average, widen protection to 2% of NAV.