Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTSean Williams, The Motley FoolSat, July 18, 2026 at 10:26 AM GMT+2 7 min readSince early June, we've watched the time-tested Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and technology-driven Nasdaq Composite (NASDAQINDEX: ^IXIC) catapult to record highs. However, Wall Street's major stock indexes may not be telling the complete story.Though there are always headwinds threatening to upend the stock market, arguably none has been more profound this year than inflation. Rapidly rising prices, driven by President Donald Trump's policies, are making life challenging for the new Fed Chair, Kevin Warsh, and the Federal Open Market Committee (FOMC) -- the 12-person body responsible for setting the nation's monetary policy.Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »But this challenge just became more complex. There's a new culprit that's driving up U.S. inflation, and it has potentially dire implications for Wall Street.President Trump delivering remarks. Image source: Official White House Photo by Joyce N. Boghosian.Before diving in, it's worth noting that a modest level of inflation is normal and healthy for a growing economy. In an expanding economy, businesses should possess some degree of pricing power for their goods and services. Even the Federal Reserve has been targeting a long-term inflation rate of 2% since January 2012.But in May, trailing 12-month (TTM) inflation more than doubled this long-term target, reaching a three-year high of 4.2%. Two concurrent price shocks, courtesy of President Trump's policies, have been behind this inflationary surge.To begin with, Trump unveiled sweeping global tariffs and higher reciprocal tariffs on dozens of countries in April 2025. Despite the U.S. Supreme Court invalidating most of these tariffs in February 2026, the president reinstated sweeping global tariffs (under a different justification) shortly thereafter.Adding duties to unfinished imported goods, such as raw metals, can increase domestic production costs for finished products. Eventually, these higher costs are passed on to consumers, leading to a bump in TTM inflation. If there's a silver lining with tariffs, it's that their impact on the prevailing inflation rate should wane after this year.The second concurrent price shock can be traced to the Iran war. Trump's decision to attack Iran on Feb. 28 led the latter to shut down the Strait of Hormuz to most maritime traffic. The result has been the largest energy supply chain disruption in modern history. In a matter of weeks, crude oil prices soared, causing pain at the pump for consumers and lifting TTM inflation to 4.2% in May.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info