Prediction: The Fate of the Trump Bull Market Has Been Sealed by One Presidential Decision

Putting politics aside, the stock market has excelled with Donald Trump in the White House. During Trump's first term, the ageless Dow Jones Industrial Average (^DJI 0.31%), widely followed S&P 500 (^GSPC +0.29%), and growth-stock-dependent Nasdaq Composite (^IXIC +0.89%) gained 57%, 70%, and 142%, respectively. Though it's common for Wall Street's major stock indexes to rise during a presidential term, the annualized gains of the Dow, S&P 500, and Nasdaq under Trump are higher than under most other presidents since the late 1890s. This Trump bull market has yet again gathered steam during his second, non-consecutive term. Since taking office on Jan. 20, 2025, the Dow, S&P 500, and Nasdaq Composite have rallied 13%, 20%, and 27%, respectively, as of the closing bell on April 27, 2026. President Trump delivering remarks to Congress. Image source: Official White House Photo. While several catalysts have been tailwinds for this rally, including the rise of artificial intelligence, record S&P 500 share buybacks, and better-than-expected corporate earnings, the fate of the Trump bull market may already be sealed, courtesy of one decision by the president himself. Trump may have already dealt a fatal blow to the bull market he's inspired Roughly two months ago, on Feb. 28, Donald Trump gave the green light for U.S. military forces, along with Israel, to begin attacks against Iran. Although wars are known to heighten uncertainty on Wall Street, it's the far-reaching effects of geopolitical conflict that can halt the Trump bull market in its tracks. Shortly after these military operations commenced, Iran shut down the Strait of Hormuz to virtually all oil shipping traffic. Approximately 20 million barrels of liquid petroleum traverse the Strait of Hormuz daily, representing 20% of global demand, per the Energy Information Administration. The Strait of Hormuz remains closed to virtually all commercial vessels as of this writing on April 27. Effectively cutting off a fifth of the world's crude oil supply led to a sharp rise in energy prices. Gas prices soared at their fastest pace in over 30 years, while the per-gallon price of diesel rose at an even steeper pace. Average U.S. gas prices per gallon on April 7, per AAA: • Regular: $4.14 (⬆️ $1.16 since war in Iran began on Feb. 28) • Premium: $5.02 (⬆️ $1.16 since war began) • Diesel: $5.65 (⬆️ $1.89 since war began) -- NBC News (@NBCNews) April 7, 2026 In February, before the effects of the Iran war were accounted for in the monthly inflation report, trailing 12-month (TTM) U.S. inflation rose by a modest 2.4%. In March, a surge in crude oil prices sent TTM inflation up by 90 basis points to 3.3%. Based on estimates from the Federal Reserve Bank of Cleveland, inflation is expected to jump by another 26 basis points to 3.56% in April. But this is just a small snippet of a much larger picture. Although energy price shocks are first felt at the pump by consumers, there's a multi-quarter lag before businesses are affected. Even if the Iran war ended right now, the impact of the largest energy supply disruption in modern history would drive up transportation and/or production costs for businesses. This inflationary impact is structural and can be a lot harder for the Federal Reserve to tackle. In other words, Donald Trump's decision to conduct military operations against Iran has sparked inflationary pressures that are likely to worsen in the coming quarters. Image source: Getty Images. Trump may force the Fed to act, whether he likes it or not The stock market has its fair share of headwinds -- but perhaps none is more glaring at the moment than inflation. When 2026 began, the stock market was trading at its second-priciest valuation since January 1871. The S&P 500's Shiller Price-to-Earnings (P/E) Ratio, also referred to as the Cyclically Adjusted P/E Ratio (CAPE Ratio), was above 40, compared to an average multiple of a little over 17 over the last 155 years. Arguably, one of the top reasons stocks have remained historically pricey is the belief that the Federal Reserve will continue to cut interest rates, making borrowing less costly for the high-growth artificial intelligence stocks driving this rally. But for the central bank to maintain its rate-easing cycle, prices need to be stable. Between February and April, TTM inflation is estimated to jump by 116 basis points to nearly a three-year high. Furthermore, as noted, the inflationary impact of energy price shocks on businesses often takes several quarters to be observed. The Fed has absolutely no reason to cut interest rates. "If Trump wants someone easy on inflation, he got the wrong guy in Kevin Warsh."@AnnaEconomist pic.twitter.com/FGMfeSqHpU -- Daily Chartbook (@dailychartbook) January 31, 2026 To complicate things, Fed Chair Jerome Powell is set to leave his post in less than two weeks. President Trump's nominee to succeed Powell, Kevin Warsh, is a former member of the Board of Governors of the Federal Reserve and a hawk, based on his voting record. Pertaining to the Fed, a "hawk" is someone who favors higher interest rates to stabilize prices (I.e., keep inflation low). Not only has Trump's decision to attack Iran resulted in inflationary pressures that are giving the Fed no impetus to lower interest rates, but the presumed next Fed chair has a track record of favoring higher interest rates to quell inflation. Higher interest rates, or even the prospect of the Fed raising rates, may be enough to expose a historically expensive stock market.

While President Trump's decision may not appear cataclysmic at the moment, with the S&P 500 and Nasdaq recently hitting all-time highs, the inflationary snowball effect is well underway, and the Trump bull market is squarely in its sights.