Trump Economy Faces New Threats as Fed Hikes Rates

The stock market has enjoyed unusually high returns during President Donald Trump's presidency. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have all seen significant gains since Trump took office.

However, a new threat to the market has emerged in the form of the Federal Reserve's rate-hiking cycle. Rate hikes can curb the growth of artificial intelligence (AI) infrastructure, which has been a major driver of stock market gains.

The AI build-out has led to strong demand for graphics processing units (GPUs) and high-bandwidth memory (HBM), causing supply shortages and price increases. Nvidia and Micron Technology have benefited from this trend, but rate hikes could slow down the expansion.

Additionally, a slowdown in M2 money supply growth or a decline could signal trouble for the U.S. economy. The Fed's actions in 2022 led to the steepest decline in M2 money supply since the Great Depression.