New Inflation Data Offers Terrible News for President Donald Trump's Economy and the AI-Driven Bull Market

详细摘要

But things may not be as perfect as they appear for President Trump's economy and the AI-driven bull market that's flourished during his tenure. New inflation data yields terrible…

From a statistical standpoint, investors have thrived with President Donald Trump in the White House. During his first nonconsecutive term (Jan. 20, 2017 – Jan. 20, 2021), the timeless Dow Jones Industrial Average (DJINDICES:^DJI), benchmark S&P 500 (SNPINDEX:^GSPC), and growth-propelled Nasdaq Composite (NASDAQINDEX:^IXIC) soared 57%, 70%, and 142%, respectively.

Trump's second term has thus far delivered something of an encore performance. The evolution of artificial intelligence (AI), record S&P 500 share buybacks, and better-than-expected corporate earnings, driven by the AI data center build-out and the strength of the U.S. economy, have been Wall Street's fuel.

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President Trump's economy and Wall Street's thriving stock market may both be on thin ice. Image source: Official White House Photo by Shealah Craighead, courtesy of the National Archives.

But things may not be as perfect as they appear for President Trump's economy and the AI-driven bull market that's flourished during his tenure. New inflation data yields terrible news for the economy and the stock market.

Before going any further, let's address an important point: modest inflation (rising prices) is perfectly normal in an expanding economy. Businesses should possess modest pricing power over their goods and services. The issue is when external factors lift the annualized inflation rate above "modest" levels.

Although no inflation forecasting tool is perfect or can concretely guarantee what's to come, the Federal Reserve Bank of Cleveland's Inflation Nowcasting tool has an impressive track record of foreshadowing the future.

Specifically, two data points in the latest Inflation Nowcasting update are troublesome for the U.S.

To begin with…

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