President Donald Trump Insists, "I Love the Inflation," but He May Soon Be Eating Those Words

Historically, the stock market has endured some of its wildest swings under President Donald Trump. But since the late 1890s, few presidents have overseen higher annualized returns in Wall Street's major stock indexes.

During Trump's first, non-consecutive term, the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 57%, 70%, and 142%, respectively. Outisze returns have continued since the start of his second term in January 2025.

Although the Trump bull market has successfully ridden the artificial intelligence (AI) wave higher, headwinds are mounting, led by inflation. While Trump has been a longtime critic of inflation under the previous administration, he's completely changed his tune about rising prices during his own presidency. He's gone so far as to insist, "I love the inflation."

Unfortunately for Wall Street, these are words the president may soon regret.

President Trump delivering remarks. Image source: Official White House Photo by Daniel Torok.

Donald Trump's policies have fueled U.S. inflation

To be clear, a modest level of inflation is perfectly normal and healthy for an expanding economy. When businesses are firing on all cylinders, they should possess some degree of pricing power for their products and services. This is why the Federal Reserve's long-term inflation target is 2% and not 0%.

What we've witnessed since April 2025 is two price shocks introduced to the U.S. economy, both of which trace back to President Trump's policies.

The first, and less impactful of the two, is the president's tariff and trade policy, implemented in April 2025. Even though the U.S. Supreme Court invalidated several of these tariffs in February 2026, they've had a persisting lift on prices in the goods sector. In other words, Trump's tariffs made select goods pricier, providing a "Trump bump" to U.S. inflation.

The second (and still ongoing) price shock is the Trump-led Iran war. Shortly after the president gave the U.S. military the green light to attack on Feb. 28, Iran closed the Strait of Hormuz to most commercial vessels. This action resulted in the largest energy supply disruption in modern history, effectively halting the flow of a fifth of the world's petroleum liquids.

This energy supply disruption sent fuel prices soaring within weeks. Between February and May, trailing 12-month (TTM) inflation spiked from 2.4% to a three-year high of 4.2%.

BREAKING: President Trump says "I love the inflation" and explains why after US CPI inflation rises to 4.2%.

Trump also announces that the US has been taking oil from Iran, including 22 ships of oil "last night." pic.twitter.com/qPX9HNrsSm

-- The Kobeissi Letter (@KobeissiLetter) June 10, 2026

When questioned about May's red-hot headline inflation figure, Donald Trump responded,

No, I love it. The numbers were great. You what I really love? I love the inflation.

The president has insisted that once the Iran war ends, oil prices would plunge and inflation would dissipate in short order. To some extent, the president's words began ringing true in June. With peace talks (at the time) advancing, crude oil prices plummeted. The resulting decline in fuel prices slashed TTM inflation for June to 3.5%.

But the problem for Donald Trump and the stock market is that there's more to Trumpflation than just energy prices.

Image source: Getty Images.

The stock market is about to loathe the inflation

To address the elephant in the room, yes, conflict between the U.S. and Iran has yet again escalated in recent weeks, resulting in another closure of the Strait of Hormuz. The energy side of inflation is far from over -- but it's not the most damaging aspect of the story.

Although headline inflation notably declined in June, Core Personal Consumption Expenditures (PCE) has hardly budged. Core PCE has long been a favorite inflationary measure of the central bank's policymakers because it excludes volatile food and energy costs.

According to projections from the Federal Reserve Bank of Cleveland's Inflation Nowcasting tool, Core PCE is expected to have eased to 3.33% in June from 3.4% in May. But by July, the Cleveland Fed is estimating Core PCE will inch higher to 3.36%.

The Fed's preferred measure of inflation (Core PCE) moved up to 3.4% in May, the highest level since October 2023.

This was the 63rd consecutive reading above the Fed's 2% target level.

"We've missed for 5 years. And we're gonna fix that."-Kevin Warsh last week pic.twitter.com/Wtayfgt8sq

-- Charlie Bilello (@charliebilello) June 25, 2026

This might not sound like much, but it indicates that the inflationary effects of the Iran war have become broad-based. Headline inflation retraced significantly in June, but Core PCE forecasts remain firm.

Several factors are likely contributing to the stickiness of Core PCE:

• Businesses are altering their shipping routes and/or supply chain sourcing as a result of the Strait of Hormuz closure.
• Petroleum-based inputs are increasing in price, such as plastics and synthetic polymers.
• Energy costs have risen, increasing downstream production costs.

Eventually, these added costs are passed on to consumers. The simple fact that Core PCE hasn't meaningfully dropped suggests we're witnessing the beginning of the next phase of Trumpflation.

But wait -- there's more.

The Federal Open Market Committee (FOMC) -- the 12-person body responsible for setting the nation's monetary policy -- also highlighted the otherworldly demand for AI infrastructure as an inflation driver in the June meeting minutes.

Although AI hardware demand outstripping supply is fantastic news for AI infrastructure companies, it's generally bad news for consumers. The exceptional pricing power that chipmakers and memory/storage companies are enjoying will trickle down to consumers and raise prices. In other words, Wall Street's No. 1 growth driver is also becoming one of its most worrisome sources of inflation.

Fed now officially blaming AI for rise in core inflation:

"Core goods price inflation had risen relative to a year earlier, which the staff judged as largely reflecting the effects of tariffs and AI-related price pressures"
* * *
"Some participants remarked that productivity... https://t.co/ne8TnjRV8s

-- zerohedge (@zerohedge) July 8, 2026

Energy supply shocks are often short-term events. But sticky Core PCE and AI-driven inflationary pressures threaten to linger, providing the FOMC with a valid justification to raise interest rates.

While the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have, thus far, climbed this wall of worry, Federal Reserve rate hikes can quickly change the stock market's and Donald Trump's tune on inflation.

The partially debt-financed AI infrastructure build-out can be slowed by higher borrowing costs. The second-priciest stock market over the last 155 years simply doesn't have any margin for error (or slower growth rates).

Donald Trump may "love the inflation" for now, but he'll likely be eating these words.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.