The Trump Administration is Setting the Stage For An inflationary Storm
Let’s talk about inflation.
One of the biggest surprises from the Trump administration was its decision to completely abandon any pretense of austerity at the first sign of trouble. When President Trump first took office, the hope was that the Department of Government Efficiency (DOGE) would be able to cut $1 trillion in spending, and between this and tariff revenues, the Trump administration would balance the budget and bring an end to the Biden era of discal dominance/ egregious spending.
Then the stock market took a nosedive, and the President threw this plan out the window.
Elon Musk left Doge which has, to date, cut $150 billion in spending. While admirable, that amount is nothing compared to the $5 trillion in spending signed into law by the Big Beautiful Bill.
Moreover, tariff revenue, while also impressive at $135 billion, is being COMPLETELY negated by the Trump administration’s spending: July’s deficit was actually LARGER than that of July 2024, DESPITE tariffs bringing in $28 billion.
The point here is that, thus far, any attempt by the Trump administration to balance the budget or reduce government spending has been purely symbolic. The President didn’t have what it takes to actually implement the cuts needed to accomplish much of anything.
And this is setting the stage for a resurgence in inflation… and a future debt crisis.
The latest Consumer Price Index (CPI) data for the month of July showed an uptick in core-inflation (inflation ex-food and energy costs). Core-CPI came in at 0.32% month over month and 3.1% year over year. As Fed Whisperer Nick Timiraos notes, the month over month increase was the second largest of the year. The three-month annualized rate for Core-CPI is now 2.8%, which is well above the Fed’s target and potentially going the wrong way.
This, combined with the Trump administration’s egregious levels of debt issuance (the U.S. is issuing MORE debt now than before he took office and total public debt just crossed $37 trillion for the first time in history) is setting the stage for a resurgence in inflation.
Truly inflation never went away. The best that can be said is that the pace of inflation is slowing… but prices are still rising as anyone who spends money on groceries, health insurance, etc. can tell you.
Moreover, it is obvious that the markets are back in bubble mode. Garbage companies are back to rallying double digits in days. Stocks are going straight up without even consolidation or corrections. Crypto is rocketing higher.
All the signs are there of major market froth.
And the Trump administration wants the Fed to start easing in these conditions?
The stage is set for another wave of inflation to hit the financial system later this year. And smart investors are already positioning themselves to profit from it.
We detail three unique investments that will EXPLODE higher during the next wave of inflation in a Special Investment Report titled How to Profit a Inflation.
Normally this report is only available to our paying clients, but in light of what’s happening in the markets today, we are making just 99 copies available to the general public.
To pick up one of the remaining copies…
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research