It’s been a tumultuous past year for our nation’s foremost financial institution, the Federal Reserve. We’ve witnessed an ongoing spat between President Donald Trump and now-former Fed Chair Jerome Powell over interest rates, and observed a historic level of division within the Federal Open Market Committee (FOMC) — the 12-person body responsible for setting U.S. monetary policy.
Despite this, the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) have all reached new heights. The question is: Can they stay there, following growing concerns about inflation?
Will AI create the world’s first trillionaire? Our team just released a report on a little-known company, called an “Indispensable Monopoly,” providing the critical technology Nvidia and Intel both need.
U.S. inflation notably jumped during the final months of Jerome Powell’s tenure as Fed chair. Image source: Official Federal Reserve Photo. The Iran war is hitting consumers’ wallets
Although Powell frequently referenced the price stickiness of Trump’s tariffs in the goods sector when discussing elevated inflation, the bulk of the worry at the moment centers on the Iran war, which began on Feb. 28.
Shortly after the U.S. and Israel commenced attacks against Iran, the latter closed the Strait of Hormuz to virtually all commercial vessels. This stymied the transport of 20 million barrels of petroleum liquids per day (about 20% of global demand), representing the largest energy supply disruption in history.
There was an immediate response in energy markets, with crude oil prices soaring. Consumers have seen gas prices rise at the fastest pace in 30 years.
But this may be just the beginning. The inflationary effects on businesses often lag a few months. Once higher production and transportation costs are accounted for in economic data, U.S. inflation can rise further.
Image source: Getty Images. The Fed’s newest inflation forecast is nightmare fuel for an expensive stock market
Before the Iran war began, trailing 12-month (TTM) U.S. inflation clocked in at 2.4%. In the subsequent two months, the Bureau of Labor Statistics reported TTM inflation of 3.3% (March) and 3.8% (April). Inflation has jumped to a three-year high in the blink of an eye — and it’s not done yet.
Story Continues