Federal Reserve Rate Hike Could Dethrone Trump Bull Market
The Federal Reserve's potential rate hike on September 16 could be a major threat to the Trump bull market, which has seen significant gains since President Donald Trump took office in his second term. The Dow Jones Industrial Average (DJINDICES:^DJI), S&P 500(SNPINDEX:^GSPC), and Nasdaq Composite(NASDAQINDEX:^IXIC) have risen by 21%, 28%, and 34% respectively, but a rate hike could force investors to reevaluate the high valuations assigned to AI stocks. The AI infrastructure build-out has been a major driver of growth, with companies like Nvidia leading the charge.
The inflation rate in May reached a three-year high of 4.2%, and Trump's policies have been a significant contributor to this increase. His tariff policy has added duties to imported goods, increasing domestic production costs and consumer prices. The Iran war is also driving up energy prices, which are pushing core inflation data even higher.
The Federal Open Market Committee (FOMC) has cited AI as a source of higher prices, due to the supply-demand mismatch and the high pricing power of AI hardware companies. If the Fed raises interest rates on September 16, it could slow down the infrastructure expansion, which would be a major blow to the stock market.