Trumpflation Becomes Three-Headed Monster, Threatening Wall Street

The stock market has historically been a wealth-creator, outperforming bonds, commodities, and real estate in terms of annual returns. However, inflation can be a major headwind for Wall Street, and Trumpflation is currently causing concerns.

President Donald Trump's policies are being blamed for the current above-average inflation, which has risen to 4.2% in May. The Iran war has been a significant contributor to this increase, with the closure of the Strait of Hormuz leading to the largest energy supply disruption in modern history.

The effects of the Iran war have spilled into the broader economy, with Core Personal Consumption Expenditures (PCE) moving up to 3.4% in May, the highest level since October 2023. This is a key measure of inflation for the Federal Reserve, and it's expected to reaccelerate to 3.36% in July.

The third aspect of Trumpflation is President Trump's tariff and trade policy. The new round of tariffs announced last month, ranging from 10% to 12.5%, on 60 trade partners will likely increase production costs and drive up prices for consumers.