Donald Trump’s victory lap on energy prices will almost certainly prove premature.
Donald Trump’s victory lap on energy prices will almost certainly prove premature.
The stock market has endured some of its wildest volatility under President Donald Trump, including the five-week COVID-19 crash in February-March 2020 and the week-long tariff tantrum in April 2025.
But more importantly, the timeless Dow Jones Industrial Average (^DJI -0.34%), benchmark S&P 500 (^GSPC -1.09%), and tech-powered Nasdaq Composite (^IXIC -2.15%) have soared with Trump in the White House. The average annual return of Wall Street's major stock indexes under Trump has been higher than under most other presidents over the last 130 years.
Since his second-term inauguration in January 2025, the Dow, S&P 500, and Nasdaq Composite have blasted to new highs, driven by the artificial intelligence (AI) infrastructure build-out, better-than-expected corporate earnings, and record S&P 500 share buybacks.
However, persistently elevated inflation, some of which traces directly back to Donald Trump's policies, such as the Iran war, can no longer be swept under the rug. While President Trump has repeatedly opined that gas prices will "drop like a rock" once the Iran war ends, he's completely missing the bigger picture concerning inflation and its effects on the U.S. economy and stock market.
Trumpflation is directly boosting consumer prices
When the U.S. economy is growing, it's perfectly normal for consumer prices to modestly increase. This is to say that businesses should possess some degree of pricing power over their goods and services when they're in demand.
What we've witnessed during President Trump's second non-consecutive term is elevated inflation, driven by two of his policies (i.e., Trumpflation): tariffs and the Iran war.
Trump unveiled his "Liberation Day" tariffs in early April 2025, sparking the aforementioned tariff tantrum on Wall Street, which saw the indexes plummet over the course of a week. Even though the U.S. Supreme Court invalidated these tariffs in February 2026, their impact on consumer prices has persisted.
According to new research from three New York Federal Reserve economists writing for Liberty Street Economics ("How Fast Do Tariffs Pass Through into Consumer Prices"), Trump's tariffs were estimated to have added 2.9 percentage points to consumer goods inflation by February 2026. When duties are added to imported goods, and those goods are used to manufacture a product domestically, it can increase production costs, resulting in higher prices for consumers.
Averytin News Financial update.