Donald Trump's Policies Spur Inflation‑Driven Decline of US Stock Market

Investors who backed the so‑called “Trump Trade”—a set of ETFs tied to homebuilding, defense spending, and reshoring—have seen the index fall about 16% since May. Analysts attribute the slide to the U.S. conflict with Iran, which pushed up energy prices, inflation expectations, interest rates and the dollar, creating a double‑whammy for equities.

The inflation surge, highlighted by a jump in the 12‑month rate from 2.4% to 4.2% between February and May, has raised concerns of a stock market crash in the second half of 2026, according to market commentary. While headline CPI eased to 3.5% in June, “Trump‑driven” inflation remains elevated. Meanwhile, AI‑focused investments outperformed traditional cyclical sectors, prompting outflows from Trump‑themed funds such as the Truth Social God Bless America ETF.