Sean Williams, The Motley Fool
7 min read
From a statistical standpoint, investors have to be thrilled with the stock market’s performance under President Donald Trump. Following gains of 57%, 70%, and 142%, respectively, for the ageless Dow Jones Industrial Average (DJINDICES:^DJI), broad-based S&P 500 (SNPINDEX:^GSPC), and growth stock-inspired Nasdaq Composite (NASDAQINDEX:^IXIC) during his first non-consecutive term, this trio has added 18%, 30%, and 40% since the start of his second term, as of the closing bell on Oct. 7.
While the annualized return of equities under Trump has been higher than under most other presidents over the last 130 years, Wall Street’s skyrocketing stock indexes may not be painting a complete picture of the challenges consumers and corporate America are facing.
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For example, persistently elevated inflation can no longer be swept under the rug. For 66 consecutive months, the prevailing inflation rate has been above the Federal Reserve’s long-term 2% target. Though modest inflation (rising prices) is perfectly normal for a growing economy, elevated inflation can pinch consumers’ pocketbooks and eventually hurt corporate growth prospects.
Image source: Official White House Photo by Daniel Torok.
President Trump has an idea to alleviate some of these pricing pressures for everyday Americans and the transportation industry — a federal gas tax holiday — but it would almost certainly backfire.
Donald Trump wants to temporarily shelve the federal gas tax
On Feb. 28, Trump approved military action against Iran, leading to the latter closing the Strait of Hormuz and effectively halting the daily flow of a fifth of the world’s crude oil supply. This roughly seven-month (and counting) closure of the Strait of Hormuz has sent energy prices soaring. Gas prices jumped at the fastest pace in three decades in April-May, while diesel prices reached a record high of $6.53 per gallon in September.
Even though the average American household only spends 3.1% on gas annually, according to research by The Motley Fool, fuel costs are one of the most visible measures of inflation for consumers.
Double-digit year-over-year jumps in gas and diesel prices were the primary catalysts that lifted the annualized inflation rate to a three-year high of 4.2% in May. Surging energy commodity prices have also played a role in kick-starting only the fourth Fed rate-hiking cycle of the 21st century.
