Wall Street’s most sophisticated traders are growing increasingly concerned about Republican prospects in the November midterm elections, and their worries are rooted in the stock charts of two American consumer bellwethers: Home Depot and McDonald’s.
While prediction markets like Kalshi and Polymarket show conventional wisdom favoring Democrats to win the House with the Senate a toss-up, high-paid hedge fund managers see greater risk for the GOP. The key signal comes from consumer-facing stocks that are underperforming the broader market, indicating economic stress among working-class voters, according to New York Post reporting.
Larry McDonald, publisher of the Bear Traps Report, points to Home Depot as a bellwether for the middle-class housing market and McDonald’s as a proxy for consumer spending. Both have underperformed the S&P 500 for more than a year, signaling that working-class consumers are cutting back due to rising prices and tepid wage growth.
“These charts are painting an ugly picture for Trump and the Republicans,” McDonald told the New York Post. “These are consumer-facing stocks, not diluted by big tech names that are pumping indices.”
The analysis highlights a disconnect between headline economic numbers and the lived experience of many consumers. While the major indices — Nasdaq, Dow, and S&P — sit at record levels and GDP growth appears strong, prices continue to climb. Inflation is running between 3.2% and 3.4%, above the Fed’s 2% target, and President Trump’s tariff agenda has contributed to sustained price pressures.
Fed Chair Kevin Warsh faces a dilemma: cutting rates to ease consumer pressure would signal dovish policy and could spike the 10-year Treasury yield, which drives mortgage and auto loan costs. The 10-year has already risen steadily throughout 2026, reaching 4.78% from 4.20% at the start of the year. Treasury Secretary Scott Bessent has intervened by buying Treasurys to suppress yields.
The 10-year is also under pressure from massive capital demands for AI infrastructure buildout, as technology companies pour billions into data centers and semiconductor manufacturing.
Bob Sloan of S3 Partners, a firm that tracks short interest in stocks, notes that negative bets on McDonald’s, Home Depot, and other consumer discretionary stocks have pulled back from a peak of 10.6% in July to 10% this week. McDonald’s hit a 10-year high in short interest in July before beginning to decline, signaling some weakening of bearish sentiment.
For New York’s financial community, the consumer stock signal poses a stark question: can the AI-driven market rally continue if the underlying consumer economy weakens? The answer may determine not only investment strategies but also the political balance of power after November.
