These Three 2026 Events Will Accelerate the Melt-Up

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By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

Mark these three dates on your 2026 calendar
Two major fiscal forces sandwich the grandaddy of monetary signals
You haven’t left the party yet, right?
The Mega Melt-Up continues

Mark these three dates on your 2026 calendar:

Wednesday, April 15
Friday, May 15
Saturday, July 4

Why are these days so special?

Each of them will have a direct, major, and unique impact on the U.S. economy and markets…

And will ultimately accelerate the Mega Melt-Up that we’re right in the middle of.

As you’ll recall, earlier this year TradeSmith called for a Mega Melt-Up – a sustained period of above-average gains in stock prices.

This didn’t come from a whim. Our research team used advanced quantitative metrics to compare today’s price action to previous times in history.

That data showed us we haven’t seen momentum like this since the mid-‘90s… and before that, the Roaring ‘20s from 100 years ago.

The price action of these three times in history has been remarkably similar. But that’s not the only parallel:

Where electrification was the dominant tech trend of the 1920s, the ‘90s saw the internet… and today, we have AI as the single most important new tech trend of the 21^st
In the 1920s, the very first margin loans allowed investors to borrow to buy stocks, both contributing to the melt-up and playing a big role in the ensuing meltdown. We saw the same accessibility with online brokerage platforms in the ‘90s… and the rise of no-commission trading on apps like Robinhood today.
Both the ‘90s and ‘20s saw an explosion of consumer credit leading to borrowing that stimulated the U.S. economy.

This final factor is what’s about to blow wide open in 2026… and what we’ll discuss in detail today.

Seeing all these factors together, the TradeSmith team is united in the idea that the last two years of above-average returns were no one-off anomaly. We’re already on track to see it again this year. And we could see it for several more.

But the other side of this coin is that, eventually, there will be an epic meltdown that could take a huge chunk out of your returns… possibly reversing most, if not all, of the melt-up move altogether.

This could well prove to be both the biggest wealth creation and destruction event in a very long time.

If you play it right, you could walk away with massive gains before the big crash wipes most investors out.

Today, we’ll show you why this trend will accelerate, starting next spring… and a great way to play it, starting right now.

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You might recognize that first date as Tax Day 2026…

And this day is so important because of the One Big Beautiful Bill Act, which President Trump signed into law in July.

This bill had a ton of new tax provisions that take effect in 2025:

No tax on tips (up to $25,000)
No tax on overtime pay (up to $12,000 single/$25,000 joint)
Auto loan interest deduction for U.S.-assembled vehicles (up to $10,000/year)
Increased SALT deduction cap (e.g., up to $40,000) until 2030
Increased standard deduction and additional deduction for seniors ($6,000 bonus for 65+)
Increased child tax credit to $2,200, indexed to inflation

All of these combine to form a big tax break that U.S. citizens will see in their tax refunds in April.

Any tipped workers in the service industry who report that income will get a bigger refund. Overtime workers will get a bigger refund. Car buyers will get a refund on interest. Parents, seniors, and those living in places with state income tax all will get a refund.

This might sound small until you look more closely at the numbers. And while we don’t have firm numbers for every one of these categories, we can make some educated estimates:

In 2018 the IRS reported 6 million workers reporting tips for an average of $6,000 a year in income on average. At an average 15% effective rate across all taxpayers, we can expect about $900 in tax savings per filer… or a refund of about $5.4 billion.
9 million new cars were sold in the U.S. in 2024, with about 80% of them financed. Even conservatively assuming just $1,000 in interest expenses per year, that comes out to $12.7 billion in tax refunds.
About 40 million families claim the Child Tax Credit each year. With an increase in the credit of $200 a child, and an average number of children per family of 1.9, that’s another $16 billion in tax refunds.
The new SALT limits might be the biggest impact. In 2022, nearly 10% of all tax filers used the SALT deduction on their filings. That’s around 15 million people. Raising the cap from $10,000 to $40,000 saves each filer thousands of dollars… And assuming just another $3,000 is saved – going off the average SALT deduction of $13,000 before limits were introduced in 2017 – that represents $45 billion.

In short, Americans are getting a big tax refund, starting next year.

Then comes the next Fed chair…

On May 15, 2026, Jerome Powell’s term as Fed chair will be up. We can safely assume that the next Fed Chair, nominated by President Trump, will give the president what he wants when it comes to rate cuts.

There’s no telling what the state of the economy will be once this happens. And there’s no telling how low rates are likely to go. But what we can do is look at where traders expect the federal funds rate to be after this changing of the guard. This chart from FedWatch shows us a slim majority of traders see the federal funds rate 100 basis points lower at the first FOMC meeting with a new Fed chair. A significant portion see the rates as low as a range of 275-300 – 150 points lower than today.

In all likelihood, rates will be lower than than they are now… and investors will expect the drop to accelerate with the new Fed chair in charge.

That’s sure to benefit small-cap companies who borrow from banks to fund operations rather than issue equity or debt.

They’ll use those funds to grow… and invest in R&D. That means the huge amount of spending companies are doing on AI now will only get easier for the smaller players… offering up bigger opportunities for investors.

Finally, July 4, 2026…

On the next Independence Day – the 250-year anniversary of the United States – the government is launching a new education savings account called “Trump Accounts.”

These will be automatically funded with $1,000 for every U.S. citizen born in 2025 and 2026. The funds must be invested into a qualified mutual fund or a market tracking ETF like the SPDR S&P 500 ETF (SPY).

Last year, 3.6 million children were born in the U.S. So let’s be conservative and say 7 million will be born in 2025 and 2026. That’s a $7 billion outlay from the government directly into stocks.

That follows the big tax refund… and a new leader of the Fed who’s sure to align with Trump’s lower-rate ambitions.

It all works in concert. Easier monetary conditions, along with major fiscal stimulus, will combine to drive markets higher… likely making 2026 yet another above-average, melt-up-style year for the S&P 500.

All that’s left is to figure out how to play it…

We’re fortunate to be recognizing these signals now when there’s still plenty of time to act on them. And if stocks follow the September playbook and fall over the next several weeks, that just gives us a better entry point.

The chief quality of the bull market so far has been a focus on technology. AI is the cornerstone of the market’s overall return for the past several years, and there’s little evidence to show that the trend has ended.

So if we want to take advantage of another melt-up year, we want to focus on tech stocks.

And if we think the Fed’s short-term lending rate will rapidly drop, we should also focus on small caps.

And diving down deeper, we should look at financial stocks like banks, which will benefit from increased lending activity… Cyclicals (or discretionary) stocks, which benefit from a healthy consumer… and Utilities and Real Estate, which benefit from lower debt rates, just like small caps do.

I set up a Screener in our software that looks for the best stocks within these areas as judged by Jason Bodner’s Quantum Score, which rates stocks on their fundamental health, technical strength, and presence of large-scale buying volumes likely from Wall Street institutions.

And I ran this screen on stocks in the S&P 600 – a group of small-cap stocks that must be profitable to be part of the index.

That takes the group down to just 32 stocks.

And here are the top 10 rated stocks of that group based on Jason’s system:

All of these stocks are profitable, small-cap companies in the sectors we talked about… are in the Green Zone… and have a Quantum Score above 85.

That makes them excellent candidates for a small-cap watchlist to take advantage of the Mega Melt-Up.

These Three 2026 Events Will Accelerate the Melt-Up