Trump launches midterms campaign blitz amid record low approval ratings

Trump began a 32-day midterm campaign tour with only 26% approval for his handling of the economy, while 71% of Americans disapprove of the Iran war, according to an AP-NORC poll. The conflict has disrupted commercial traffic through the Strait of Hormuz and pushed diesel above $6 per gallon last week, intensifying household concerns over food and petrol affordability. Weak approval ratings and competitive races threaten Republican control of Congress, potentially constraining Trump’s legislative agenda, while his tariffs and support for AI data-centre expansion remain politically contentious.

Analysis

The investable transmission channel is not the polling itself but a higher probability of post-election policy gridlock alongside a politically motivated push to suppress retail fuel prices. In the next 32 days, any de-escalation headline could produce a sharp unwind in crude/product risk premia; the cleaner expression is short diesel-sensitive refiners and transport operators only after confirming that physical disruptions are easing, rather than assuming an immediate normalization. Conversely, sustained disruption keeps inflation expectations elevated and raises the odds that the Fed remains restrictive, pressuring long-duration software and unprofitable AI infrastructure beneficiaries.

The most underappreciated second-order exposure is Texas power and water permitting. AI demand remains structurally supportive for generation, electrical equipment and gas-fired capacity, but state-level scrutiny can delay data-center energization even if federal rhetoric remains supportive. That shifts value from hyperscaler capex beneficiaries with optimistic deployment assumptions toward incumbent regulated utilities and merchant generators able to monetize scarcity; it also increases execution risk for projects dependent on new transmission, water rights, or behind-the-meter generation.

A divided-government outcome over the next 1-3 months would likely cap the probability of major tariff, tax, or permitting legislation, reducing policy upside embedded in domestic manufacturing names. The contrarian point is that markets may overprice a broad manufacturing reshoring benefit: elevated diesel, freight, steel-input and financing costs are a near-term margin tax on industrial OEMs, especially those unable to pass through costs. Over 6-18 months, however, continued energy insecurity favors US upstream producers and LNG infrastructure over fuel-consuming industrials.

This thesis is falsified by a durable reopening of regional energy flows and a rapid decline in diesel cracks, which would relieve freight inflation and restore cyclicals' margin outlook. For data centers, monitor ERCOT interconnection timelines, utility load-growth guidance, and Texas water-permit outcomes; actual load deferrals—not political headlines—would justify reducing AI-power exposure.

Key Decisions for Investors

• Maintain a 1-3 month long XLE / short IYT pair while fuel logistics remain constrained: upstream cash flows retain commodity convexity while trucking, rail and parcel margins absorb fuel costs with a lag. Target 8-12% relative return; exit if diesel prices and refining cracks retrace materially for two consecutive weeks.
• Prefer long LNG and KMI over broad industrial reshoring exposure for a 6-18 month horizon. Energy-security spending and gas infrastructure utilization have more direct earnings sensitivity than diversified industrials; reassess if export volumes, contract activity, or US natural-gas basis weaken materially.
• Use any broad AI-related selloff to accumulate CEG and VST selectively rather than high-multiple data-center landlords. Their scarcity value is tied to delivered power, but size modestly until ERCOT load forecasts and interconnection queues confirm no material project slippage; a regulatory cap on power pricing or load deferrals is the key downside risk.
• Avoid adding to transport and diesel-intensive industrial longs, including IYT and CAT, before evidence of lower fuel costs appears. Near-term earnings revisions can lag spot fuel moves by one quarter, creating downside asymmetry if energy disruption persists.
• Set an event alert around the election and any credible energy-flow normalization: a rapid de-escalation would favor covering XLE/IYT and rotating toward XLI, while a continued inflation impulse would support retaining energy exposure and reducing duration-sensitive growth beta.