I can't speak for DESeq2, but edgeR does not make any assumption about the average fold change. edgeR can, for example, accommodate unbalanced DE whereby 15% of genes are up-regulated while none are down-regulated. TMM works on the log-fold-change scale and computes robust means rather than arithmetic means. The assumptions of TMM are that either
- most (~80%) of genes are not DE or
- the differential expression is balanced
Only one of these conditions needs to be satisfied rather than both. As a very rough rule, TMM should work reasonably well if abs( %up - %down) is less than about 15%, where %up and %down are the global proportions of up and down DE genes.
We showed long ago (Oshlack et al 2007) that loess normalization can tolerate up to 20% unbalanced DE well but starts to break down at the 25% point. TMM is not quite so aggressive as loess but makes the same sort of assumptions.
Reference
Oshlack, A., Emslie, D., Corcoran, L., and Smyth, G. K. (2007). Normalization of boutique two-color microarrays with a high proportion of differentially expressed probes. Genome Biology 8, R2. https://pubmed.ncbi.nlm.nih.gov/17204140/
See this Nature (rebuttal) paper https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4110711/ arguing why (from a biological standpoint) the DESeq method should still be used when there's global transcriptional amplification by c-Myc.