Capitalism, and especially American-style capitalism post-1980, is an easy enough game to play.
That’s certainly not to suggest everyone’s invited to the table. In theory, anyone can pull up a chair. In reality, it’s more complicated than that.
But if you can get in the door and you have money to buy into the game, you’re pretty much all set. Because the system’s set up such that capital grows multiplicatively. “The rich get richer” isn’t just half an old saw. It’s a concise description of how capital perpetuates itself, and it also nods to the (arguable) inevitability of the system’s eventual demise.
Anyway, I don’t want to debate theory. Well, actually I do. I always want to debate theory. In fact, that’s all I’d ever do if I thought enough people were interested, but I know they aren’t. I know you aren’t. Not a majority of you.
The point here, rather, is just to note that with US stocks poised to close out another winning quarter — the seventh in eight and the 10th in 12 — the vaunted “wealth effect” from financial assets is in full swing across the world’s largest economy, particularly with credit and even long-end Treasurys (a pariah asset since 2022) likewise set to show a quarterly advance.
The figure above shows you the quarter-by-quarter breakdown for what, as of the latest Fed update out earlier this month, is a $65.4 trillion windfall for household wealth since the March 2020 equity market lows.
I included a rough estimate for Q3’s equity gain. If it’s even close to correct (and it will be), the stock-related wealth gain is ~$7 trillion or so for 2025 which, you’ll note, began with a $2.4 trillion decline in the value of household equities.
If you’re Donald Trump, large back-to-back quarterly stock-market gains are good news, but also risk becoming bad news to the extent they fan inflation. As BofA’s Michael Hartnett reminded investors this week, Trump’s disapproval rating on inflation is very high, and shows no sign of receding.
As the figure shows, nearly six in 10 don’t think Trump’s doing enough to deliver on one of his key campaign trail promises: Bring down inflation.
Of course, someone determined to corral consumer price growth wouldn’t typically quintuple the average US tariff rate as a first order of business. Those two things — beating back inflation and a draconian consumer tax — work at cross purposes. But this is Trump we’re talking about. A man for whom up can be down.
But reality has a way of asserting itself regardless of how hard you try to deny it. And if you put money in people’s pockets — or even just inflate the value of their on-paper net worth — they’re likely to spend it. Even if, by virtue of being already well-off, their marginal propensity to consume is relatively low.
We’ll see how it goes, but someone like Trump’s far more likely to try to control or distort reality than accept it. We’ve seen that before, and in all sorts of arenas and contexts.
“Asset price inflation begets consumer price inflation and a second wave of inflation is politically very risky before the 2026 midterms,” Hartnett went on to write, in the same note mentioned above, on the way to suggesting we’re in for more “US government intervention to control prices in sectors that ‘whip inflation.'”
Because it’s obligatory, I’ll add that it’s now very unlikely the midterms will meet a stringent definition of “free and fair.” And the BLS is under enormous pressure to produce favorable statistics. So, I’m not sure this is actually as big a concern for The White House as it would be under more traditional political circumstances.
Surprised you didn’t have a comment on the BLS deciding to not publish the inflation report anymore….
That is not accurate. The BLS did not decide to stop publishing “the inflation report anymore.” Everyone seems to have read an Axios headline and not bothered to read the actual Axios article. When you read it, in full, you discover that the uproar isn’t warranted.
Here: https://x.com/JedKolko/status/1969389460832780795
Folks, there’s enough misinformation out there as it is without good people like us making things worse. Use some common sense: If the BLS ever says “We’re not publishing the monthly CPI report anymore,” you can be absolutely sure that BBG and WSJ will blast out so many stories in such a short period of time that you’ll think the world’s ending. And so would I. And so would the FT. And so would NYT. Etc. The administration’s not going to sneak something like that by with only an Axios reporter noticing it. That’s absurd. And, again, that Axios article, if you actually read it, does not make that claim, which is a good thing because it’s not true.
I believe there is a delay in a report used to update the weighting of CPI components. Perhaps the upcoming CPI report will have to be revised when the weightings are updated, but I doubt the revision will be large.
That said, the US government’s data gathering and reporting is eroding. Look away from economic data, and you see reports being terminated in hunger, public health, etc. In economic data, even before the deliberate manipulation has manifested, quality and completeness is breaking down as agencies lose funding and staffing.
Will the deterioration and/or falsification of economic data affect the midterms? I don’t think US voters decide if inflation is high or rising based on CPI PCE PPI or other reports. They key on prices they pay in daily life: groceries, gas and electricity, insurance, etc. For political purposes, the inflation reports to watch are approval ratings and perhaps consumer inflation expectations.
I guess data dis-integrity can also matter to the extent that it changes financial markets – drives up rates, etc. That might be hard to discern given everything else going on.
The good news for Trump is that inflation disapproval number is pretty close to the ceiling already. I’m confident that 35% will never be unhappy with Trump no matter how badly their fortunes turn. Fox and Newsmax would never allow that 35% to hear that it’s in anyway Trump’s fault.
The 35% is probably fairly accurate for the “safe” ceiling for Trump. That’s just about the proportion of the electorate that voted for him.
So good – you have it nailed. BUT what can he do to hide inflation when everything says it is going up?
If I recall correctly, President Trump did not promise only to bring inflation down. He promised to bring prices down. The distinction between the level of prices and the inflation rate is probably lost on most of his supporters who look forward to deflation without any awareness of the potentially dire economic consequences. It seems obvious to me the price of gasoline and groceries drive political opinions among low-information voters. So, even at the Fed’s 2% target there will still be those voters will feel betrayed. I don’t believe that 59.1% dissatisfaction number is likely to retreat much.