The Data Doesn’t Lie: Trumpflation Is Becoming More Entrenched, Which Is Bad News for the Fed and Wall Street
Since early June, the timeless Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and growth-stock-dominated Nasdaq Composite (NASDAQINDEX: ^IXIC) have blasted to new highs. But this stock market outperformance, which has been commonplace under President Donald Trump, likely can’t sweep inflationary concerns under the rug indefinitely.
New data indicate that Trumpflation (i.e., inflation directly driven by Trump’s policies) is evolving — and that’s terrible news for the stock market and Federal Reserve policymakers aiming to stabilize prices.
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Trumpflation is digging in its heels
Although President Trump’s tariffs have provided a modest boost to prices in the goods sector, it’s the Trump-led Iran war that’s primarily lifted inflation to multiyear highs. Shortly after the president green-lit military operations against Iran, the latter closed the Strait of Hormuz to virtually all maritime traffic. Doing so essentially halted the movement of a fifth of the world’s petroleum liquids.
For several months, the Iran war was a story that revolved around historic energy supply disruption. Fuel prices soared at the fastest pace in decades, pushing trailing 12-month (TTM) U.S. inflation from 2.4% in February to a three-year high of 4.2% in May.
But the latest economic data show that Trumpflation is now about far more than just higher energy prices.
While headline inflation dipped from 4.2% in May to 3.5% in June, Core Personal Consumption Expenditures (PCE) hardly budged. Core PCE, which removes volatile food and energy costs, eased from 3.4% in May to 3.3% in June. According to an estimate from the Cleveland Fed’s Inflation Nowcasting tool, it’s expected to inch back to 3.4% in August.
The price stickiness of Core PCE indicates that inflationary pressures are broadening, as Carson Group’s Chief Macro Strategist Sonu Varghese and Chief Market Strategist Ryan Detrick recently noted.
Of the 178 inputs to Core PCE, 52% had TTM inflation rates above 3% in June. In comparison, only 41% of Core PCE components were accelerating at 3% or greater when President Trump announced his “Liberation Day” tariffs in April 2025.
The Fed may be forced to act
While energy supply shocks are traditionally short-lived, the evolution of Trumpflation suggests that higher prices may stick around considerably longer than initially anticipated.
