But there’s no reason any ordinary investor should be clamoring for shares of SpaceX, or should feel left out if an effort to buy shares near the opening price fails. Public offerings are hit or miss, and early exuberance over an IPO often brings buyer’s remorse.

Part of the allure of SpaceX is Musk himself, given that his electric-car startup Tesla has made many shareholders rich. But Tesla didn’t start out as an overnight success. It was a money loser when it went public in 2010, and didn’t become profitable for a decade. One year after going public, Tesla’s stock was an underperformer, up by 22%, compared with 30% for the S&P 500 index. It didn’t break out and become a fast-riser until its third year as a public company.

Read more

If Trump had taken office in 2025 and gone into deep hibernation, we’d probably have inflation back to the normal range of 2% or so, with lower interest rates and steady growth. Instead, we have a renewed spurt of inflation, gasoline prices above $4 per gallon, rising interest rates and deep uncertainty over the health of the economy.

Inflation jumped from 3.8% in April to 4.2% in May, as the effects of the energy shortage caused by Trump’s Iran war spread throughout the economy. Gasoline prices are 41% higher than a year ago, driven entirely by the Iran war. Before Trump launched the war on February 28, there was abundant oil in global markets and gas prices were below $3 per gallon on average.

Higher energy costs show up most prominently in gasoline prices posted at every filling station in the country, but they also creep into the prices of many other things through higher production and transportation costs. Airfares are up 27% because of higher fuel costs. Household energy costs are up 6.4%. Clothing prices used to be tame, but they’ve suddenly jumped nearly 5%, the biggest increase since 2022.

[The AI bubble is deflating]

Grocery prices are rising at a modest 2.7%, but could spike as the higher cost of production, shipment and fertilizer caused by the Iran war moves through supply chains. All these price increases come as Americans are thoroughly fed up with costs that have gone up and stayed up during the last five years.

Inflation is now outpacing wages, which means real income growth is negative and the typical worker is falling behind. The last time this happened, in 2023, President Joe Biden watched his approval ratings collapse, never to recover.

You might think Trump would try to do something about all this. He is—by making it worse.

Trump’s promises to lower prices were always disingenuous, because he vowed to impose new tariffs at the same time. Tariffs are taxes on imports that raise prices, pure and simple. American importers pay the tax to the government and try to recoup as much of it as possible by passing the cost increase along to buyers.

[Everybody calm down about Elon Musk’s SpaceX IPO]

Courts have struck down Trump’s most draconian tariffs, but he is undeterred. His administration is preparing to roll out new tariffs to replace the ones courts have invalidated, and these are likely to have better legal standing. That means they’ll probably stick.

Overall, Trump has raised the average import tax from 2.5% to about 10%. The new tariffs could push that to 15% or so.

Meanwhile, the core element of Trump’s 2026 affordability plan was supposed to be the tax cuts he signed into law last year. But Moody’s Analytics says the higher cost of energy and other things caused by the Iran war now exceeds the average tax savings from the tax law. As usual, the burden of higher costs hits lower earners the hardest.

Trump’s approval rating is going the way of Biden’s. His net approval rating, which is the portion who approve minus the portion who disapprove, is -25, according to YouGov. That’s lower than Biden’s net approval ever got. Trump’s marks for handling inflation have collapsed, from +6 net approval when he took office in 2025 to -44 now.

What that means is that voters generally believed Trump when he said he would get prices down. But when it came time to convert words into action, Trump did the opposite of what he promised, pushing prices up. The data shows it and voters, not surprisingly, are pissed.

[Trump has a Joe Biden problem on jobs]

If there’s any good news, it’s that May inflation was about what markets expected, so it didn’t induce any sharp moves on its own. Some economists think inflation may be close to a peak for the year. And there’s always the possibility the Iran war will end and the oil will start flowing again, even though Trump’s perpetual promise of an imminent deal has become a running joke.

The lesson of the Biden years, however, is that inflation stings long after the data shows that it’s subsiding. Trump has burned voters, and he may never get them back.

Enjoy a cartooon.

You can order this cartoon ^☝️ or others like it, plus merch featuring cartoons, at CartoonStock.com.

Semis have been on a tear since 2023, driving much of the overall stock market’s gain since then. The trigger has been the artificial-intelligence buildout, with unrelenting demand for chips from the likes of Nvidia, AMD, Broadcom and Micron.

But the semiconductor sector is now undergoing a correction, with the S&P 500 semiconductor sub-index down 10% in just five trading days. There’s no single cause for the selloff, but investors seem to be growing cautious after an epic runup.

Semis have outperformed the S&P 500 index for three years, with an explosive breakout beginning this April as first-quarter earnings results blew past expectations. From March 31 through June 2, semis soared by an almost unimaginable 63%. The S&P 500 during that time rose by just 20%. Semis accounted for nearly the entire gain in the overall market.

A pullback from those stratospheric levels would be totally normal, and arguably welcome. The question, of course, is whether it’s just a modest, one-sector correction or the start of something bigger.

[Here’s what you need to know about the SpaceX IPO]

Some analysts worry that the AI stock rally could collapse like the dot-com bubble that burst in 2000. The bubble part of that cycle ran for nearly five years, from 1995, when the Netscape public offering inaugurated the tech rally, to early 2000, when tech stocks peaked.

It got ugly from there. From the peak in March 2000, the NASDAQ tech index fell 79%, bottoming out in 2002. It didn’t regain the 2000 high until 2015.

The current downtrend in semiconductor stocks doesn’t look anything like that. Plus, much of the rally has been based on rising real profits, not the phantom future profits that characterized the dot-com bubble.

But the majority of the year’s gains might be in. Three huge upcoming public offerings—SpaceX, Anthropic and OpenAI—will flood the market with new shares, and many buyers hoping to get in on the action will have to sell something else to generate cash. Cashing in on the huge gains in semis to rotate into the next hot thing (🤔) might make sense.

[The Weekly WTF: Trump robs small businesses]

The average Wall Street forecast for the S&P 500 index at the end of 2026 is 7,612, according to Yardeni Research. The index is currently at 7,387, just 3% below the year-end target. Forecasts range from a high of 8,250 (Yardeni) to a low of 7,100 at Bank of America.

BofA put out a research note on June 5 advising clients to “take profits” because certain technical signals suggest stocks may be at a near-term peak. Other analysts still think it’s wise to buy any sizable dip in stocks.

[Trump has a Joe Biden problem on jobs]

Ordinary investors shouldn’t buy or sell based on day-to-day market trends. But the stock-market rally has been one of the few things going right in a turbulent economy beset by war-based inflation, President Trump’s trade wars and a long-term slowdown in hiring. Confidence surveys show rising stock wealth is one of the few things making Americans feel better these days, at least for those lucky enough to own stocks. A bursting stock bubble is something nobody needs.

Enjoy a cartoon.

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Ominous coverage of the forthcoming public offering of SpaceX, Elon Musk’s rocket company, makes it sound like the man who ransacked the federal bureaucracy in 2025 will soon wreak similar havoc with the stock market.

The Bulwark recently reported that anybody with a 401(k) plan will soon be “risking your retirement savings while simultaneously bailing out X and Cybertrucks.” The connection is that some index funds will buy SpaceX stock, and SpaceX now owns X, the social media network Elon Musk bought when it was called Twitter. SpaceX is also the largest buyer of the Cybertruck built by Tesla, another Musk company. So if you own SpaceX stock, you’re exposed to much of Musk’s sprawling business empire.

That might not have been a big worry a few years ago. But Musk has become a polarizing political figure who backed Donald Trump in the 2024 election and ran the “DOGE commission” that dismantled dozens of federal agencies, with no remit from Congress, once Trump became president in 2025. Musk’s approval rating fell after his DOGE detour, and now sits at around 36%.

For ordinary investors, there are three issues regarding the SpaceX IPO, which is the biggest ever. The first is whether you might get stuck owning the stock against your wishes, via an index fund. The second is whether you should buy the stock to cash in on a rocketship of a company, or ignore it. The third is whether the SpaceX IPO and a few other huge ones coming soon, including Anthropic and OpenAI, will change the investing climate.

Read more

“With a great jobs report, stocks should go up, not down,” Trump wrote on social media. “That’s the way it was for 200 years.”

200 years! 😂 Trump has some memory! Except that’s not the way it was for 200 years, or even for two years.

If you think stocks only go up, you might have found the recent selloff jarring. The S&P 500 index dropped by 2.6% from June 4-5, while the NASDAQ dumped 4.2%. The storied semiconductor sector that’s been driving most of this year’s gains dove by 8% in just two days.

Trump aside, it all makes sense.

Read more

During the last two years of his presidency, Joe Biden bragged repeatedly about booming job creation. The facts supported his claims. But voters had other things on their minds, mostly high inflation and stretched paychecks. Elevated prices wrecked Biden’s approval rating starting in 2022, and he never recovered.

Trump finds himself in the same spot. After weak job growth in 2025, hiring has picked up, with the economy adding 172,000 new jobs in May. The average of the last three months is 188,000 new jobs per month. That’s good news, especially with the Iran war clouding the outlook.

But this aggregate view of the labor market isn’t something ordinary Americans intuitively relate to. Prices, on the other hand, are personal. Everybody notices when rent, food, or gas prices go up. Especially when prices go up by more than incomes, which is happening now.

[Why most Americans are missing out on an epic stock rally]

Real income growth, adjusted for inflation, turned negative in April for the first time in three years. It’s likely to get worse. Wages are growing at 3.7% year-over-year. Inflation will probably jump from 3.8% to around 4.2% when the next set of numbers comes out June 10. When prices rise by more than earnings, the typical paycheck buys less. The average worker falls behind—and gets angry.

[Nobody’s fixing anything]

That trend is likely to persist through 2026—and it’s largely Trump’s own doing. Trump has done two things that are pushing prices higher. First, he’s imposing tariffs, which are taxes on imports that raise costs throughout the supply chain, all the way to consumers. Courts have struck down many of Trump’s tariffs, and he’d be wise to take the hint and knock it off. Yet, he persists. He’s now rolling out a whole new set of tariffs to replace some of the ones the Supreme Court killed earlier this year.

The other source of inflation is the Iran war Trump launched on February 28. A shaky ceasefire has been in place for nearly two months, but Iran is still blocking most shipments of oil and other commodities through the Strait of Hormuz. If the strait opened tomorrow, it would still take months for markets to normalize and price shocks to fade. And Iran might be able to keep the strait closed for months.

Even with solid topline job growth, the details show a spottier picture. There’s been no revival of manufacturing jobs, which is the stated purpose of Trump’s tariffs. Most economists say tariffs will never boost manufacturing on the whole, because for every protected industry there’s another paying more for inputs due to the tariffs. Job numbers bear that out.

Most of the job growth is also in health care and social services, which isn’t bad. But that’s part of the economy where spending is somewhat mandatory and supported by a lot of government payments. Job growth in other parts of the economy isn’t so great.

There’s been a net gain of just 18,000 jobs during the last year in business services, where there are a lot of good-paying white-collar jobs. Six of 13 major categories have lost jobs during the last year. In financial activities, which includes banking, insurance, investing and real estate, there’s been a loss of 107,000 jobs during the last year. More white-collar anxiety.

Trump’s approval rating is around 35%, which is the lowest level of his two presidential terms. His ratings on handling inflation and the economy have collapsed. Consumer sentiment is dismal, according to a variety of surveys. Ordinary Americans clearly think something is wrong.

[See the middling Trump economy, in 9 charts]

Trump has been bragging about the “great jobs report,” just as Biden did many times. But a president boasting about data seems out of touch when household finances are stretched. A second president in a row is now falling into that trap.

GDP grew at a 1.6% rate in the first quarter and it might do the same or a little better in the second quarter. That’s decent. The unemployment rate is 4.3%, not the lowest ever but below the average of the last 25 years.

Almost all the growth, however, is coming from the artificial intelligence buildout. Of that 1.6% growth in the first quarter, 1.5 percentage points came from AI alone. And those segments account for just 13% of the economy, which may make the current Trump economy one of the most lopsided in decades.

“Outside of AI, there is zero vitality in the US economy,” economist David Rosenberg of Rosenberg Research wrote in a June 1 analysis. “The AI euphoria is masking a narrowing market and a weakening economy.”

[See 5 rules for managing AI]

Rosenberg estimates that the traditional drivers of economic growth—housing, construction, non-AI business investment and services—are contracting. That means most of the economy is in a recession, masked only by the outsized spending on AI.

The same thing is happening in the stock market, where an epic boom in semiconductors, driven largely by insatiable demand for AI hardware, accounts for essentially all of the dizzying gains of recent months.

The Iran war that began on February 27 sent stocks lower for a month, as investors weighed the damage soaring energy prices might cause. But a rally began at the end of March that has propelled the S&P 500 index 20% higher since then.

It’s all AI. Goldman Sachs stripped AI stocks from the S&P and found that without them, the index would still be lower than it was when the war started. The 20% rally came from blockbuster profits at companies selling the gear AI requires, which pushed war concerns to the sidelines and compelled investors to get in on the action. Without AI, that 20% rally wouldn’t have happened.

[The Weekly WTF: America the Immoral]

The AI boom isn’t fake. Unlike the dot-com boom and bust of the late 1990s, the AI economy is led by established companies such as Google, Nvidia and Amazon that are deeply profitable. Stock prices are rising because real profits are soaring, not because investors hope the AI darlings will become profitable one day. The stock values of big AI names could fall, but the companies aren’t going to go bust.

Most Americans, however, don’t live in the AI economy. They live in the traditional economy, the other 87%, where growth is anemic and there are ample signs of stress.

Inflation has now hit 3.8%, while wage growth has dipped to 3.6%, the first time price hikes have outpaced wage growth since 2023. That means the typical worker is falling behind, with the average paycheck buying less.

The savings rate has fallen to the lowest level since June 2022, which is when post-Covid inflation peaked at 9%. The savings rate typically falls when inflation rises and consumers need to draw down their bank accounts to keep up with rising costs.

[Markets to Trump: End the Iran war!]

An obvious stressor is the price of gasoline, which has jumped to around $4.30 per gallon since Trump’s Iran war throttled global oil supplies. That’s a 45% price hike from pre-war levels.

Americans feel lousy. The University of Michigan’s sentiment index is at the lowest levels in survey data that goes back to 1952. Another confidence index, maintained by The Conference Board, isn’t at record lows, probably because it puts less emphasis on inflation than Michigan’s does. But it’s still near the lowest levels since the 2020 Covid downturn.

Where would we be without AI? It’s possible businesses would be investing in something else, but probably not with the vigor they feel toward AI. Most likely, the economy would be close to stall speed, with unemployment higher and stocks considerably lower. Maybe the Federal Reserve would be enacting monetary stimulus instead of contemplating interest rate hikes.

Trump’s approval ratings have plunged, as his tariffs and Iran war drive prices higher for ordinary Americans. But without AI, unemployment would probably be higher, stocks lower, and Trump even deeper in the hole.

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If the only news you got were a couple of charts, you’d have a pretty good idea what’s happening with the Iran war. Maybe even better than any message you could divine from President Trump’s erratic pronouncements.

Markets are plainly pricing in the end of the Iran war. Oil prices are down, gasoline prices are falling, and stocks are rising as if everything’s fine.

The war is not over, in reality. There is still virtually no tanker traffic passing through the Strait of Hormuz. Global oil production has dropped by about 15%, which is a huge hit to supply. US and Iranian negotiators seem to be talking, but the most they seem likely to accomplish is a continuation of the status quo. Bombs aren’t flying, but oil isn’t flowing, either.

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US stocks have caught up in recent weeks, at the same time some of Trump’s most damaging policies have faltered. The United States may also be more immune to the fallout from the Iran war than other regions more dependent on Persian Gulf energy imports. But Trump could still throw caution to the wind as his presidency winds down, and some financial advisers are bucking longtime advice and recommending more exposure to global markets.

Read more

But stock gains aren’t shared evenly, of course. By some measures, in fact, the stock market is less democratic than ever. Though many Americans have retirement plans that include stocks, the vast majority of financial wealth is concentrated among the wealthiest and oldest Americans. While America as a whole is richer than ever, most Americans aren’t enjoying the bounty.

Stocks have been on a tear since late 2022, with the S&P 500 index up 110% from its 2022 low. The artificial intelligence revolution has almost single-handedly driven those gains. And that followed a long boom in stocks after the 2008 financial crash, interrupted only briefly by a 2022 bear market as investors digested a burst of inflation.

That long period of gains has generated a financial bonanza. Data from the Federal Reserve shows the amount of stock market wealth soared from $2.1 trillion in 1989 to $57.7 trillion at the end of 2025. Based on gains so far this year, total stock market wealth has probably risen to around $63 trillion.

That’s an astonishing amount of created wealth. When the Fed started collecting the data in 1989, real estate was the largest category of household wealth, worth three times as much as all stocks combined. Real estate has appreciated handsomely since then. But stocks are now the single biggest source of wealth, worth about 20% more than all real estate. The total gain in stock wealth since 1989 is roughly 3,000%.

[Check out this interactive graphic on the growing prosperity gap]

Stock ownership is highly concentrated among wealthy and older Americans, however, and getting more so, not less. The richest 10% of Americans own 87.4% of stocks, up from 81.6% in 1989. The bottom 90% own just 12.6% of stocks, down from 18.3%. The “K-shaped” economy—a thriving upper tier of Americans and a struggling lower tier—may be more pronounced in stock ownership than in any other aspect of American life.

Stock ownership increasingly skews older, as well. Americans 55 and older own 79.1% of all stocks, up from 58.7% in 1989. Those under 55 own just 20.9% of stocks, down from 41.4% in 1989.

Gallup reports that 62% of Americans own stocks, so it sounds as if the majority of Americans benefit from a roaring stock market. But the lopsided concentration of stocks among the richest and oldest suggests otherwise. Most Americans own stocks in their retirement plans. A soaring market will help pad retirement for those folks, but it won’t necessarily make them better off today.

[See how older homeowners have locked up the housing market]

This growing wealth disparity now shows up regularly as a large gap in confidence between those who own stocks and those who don’t. While confidence is depressed overall, it is lowest among Americans who own no stocks and highest among those with the most stocks.

That confidence gap might be unsurprising, but it reflects ominous long-term changes in the US economy. For the last 25 years, labor income has been declining as a share of GDP, while corporate profits have been rising as a share of GDP. That means a smaller share of total income is going to workers and a higher share is going to investors. It’s harder for workers to get ahead through raises and promotions and a continually improving career.

[Nobody’s fixing anything😡]

Workers are losing ground because of globalization and a tech-driven economy that provides revolutionary new efficiencies without corresponding worker protections. It’s a complex problem with no easy solutions. Liberals want more policies that protect workers, such as a higher federal minimum wage and stronger union protections, plus higher taxes on the wealthy. Other researchers argue that workers need more relevant skills allowing them to cash in on a technology-driven economy. Some combination of all of the above is probably the best mix.

The AI revolution will probably make these disparities worse. But it may also bring new attention to wealth inequality and force some action. Meanwhile, anybody who can buy a share or two probably should.

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But one change has been stark: The shift of real-estate assets away from younger Americans, toward older ones. And this helps explain the ongoing affordability crisis, along with many Americans’ persistently negative views on the economy.

Graphic artist David Foster and I set out to map the changes in wealth during the last 40 years, using data from the Federal Reserve. Most of the trendlines changed bit-by-bit. You can see David’s interactive graphic here.

But when we split real-estate wealth into two age groups, representing older and younger Americans, the changes were more dramatic. The portion of real-estate wealth owned by younger Americans has been plummeting:

A wannabe home buyer might look at this chart and say, I coulda told ya that. It has become notoriously difficult for many working Americans to muster the money for a down payment and crack into homeownership. Home affordability hit the worst levels on record following the Covid pandemic in the early 2020s, when super-low interest rates led to a surge of buying that pushed prices through the roof. Affordability is still poor.

[More: Nobody’s fixing anything]

But the sharp drop in the portion of real-estate wealth owned by Americans under 55 has been underway for a quarter century. Some of it comes from an aging society. Americans 55 and older represent 30.1% of the population today, up from 20.6% in 1989, when the Fed’s wealth data series begins. Those under 55 have dropped from 79.4% of the population to 69.9%. Since older Americans represent a larger share of the population today, that alone should push their share of real-estate wealth higher.

But that still doesn’t explain the magnitude of the shift. The share of housing wealth owned by older Americans has jumped by nearly 20 percentage points, roughly double the gain in population share. The share owned by younger Americans has dropped by the same amount.

[More: The economic toll of the Iran war is spreading]

This is where some of the adverse trends of the last few decades factor in. Since 1980, home prices adjusted for inflation have jumped by 68%, while incomes have risen by just 10%. Builders focus on large homes they can sell for the most money, while tight zoning rules and other barriers limit the supply of cheaper starter homes.

The total amount of student loan debt has ballooned from $260 billion in 2004 to $1.7 trillion today, more than a sixfold increase. That has obviously saddled younger workers. The total student debt load held by 18-to-29-year-olds has more than doubled, from $140 billion to $300 billion. For thirtysomethings, the amount of student debt has jumped from $110 billion to $520 billion, nearly a fivefold increase. These payments make it even harder to save for the down payment on a house and to cover the mortgage once you make a purchase.

Housing wealth has grown by a lot since 1989, and every age group has benefited in raw terms. The total value of residential real estate has mushroomed from $7 trillion to $47.9 trillion since 1989 For those 55 and over, real estate wealth has grown by $26.4 trillion. For those under 55, it has grown by $14.6 trillion.

[More: Trump says to hell with affordability]

But notice how lopsided the gains have been. Older Americans who represent 30% of the population have captured 64% of the gain in home values since 1989. We see the same trend in declining homeownership rates for younger people. The homeownership rate for 35-to-44-year-olds, for instance, has dropped from 67% to 60% since 1990. That’s a lot of people who aren’t buying homes and benefiting from rising values over time, as prior generations did.

This could have a lot to do with why some Americans seem to think the US economy is permanently in recession. The University of Michigan’s sentiment index is at the lowest level in a series that dates to 1962. Yet the economic data is solid and there’s no recession, by standard measures. Overall spending is holding up, but that’s largely driven by wealthy Americans who have benefited from the soaring values of homes and stocks. On the bottom rung of the K-shaped economy, millions of Americans who feel like they can’t get ahead are perpetually gloomy.

The point isn’t that older Americans own too much real estate and ought to cough some of it up. A lot of that wealth will filter to younger generations eventually, through inheritances.

The problem is that younger Americans face too many barriers to homeownership and to building wealth during their prime earning years. There’s a bipartisan bill in Congress meant to provide federal incentives to break permitting logjams and take other steps to produce more housing. It would probably do some good, but it might not pass.

Housing is mostly regulated locally, and there are a lot of things states and cities can do to lower costs, such as cutting red tape, easing land-use laws and creating incentives for developers to build more multifamily housing.

Hopeful buyers have other choices. They can move from expensive coastal cities to more affordable ones in the Midwest or South. And living with parents to save money has become so common there are now guidelines for how to do it right. While you’re there, maybe drop a hint about getting an early inheritance.

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Consumer confidence is at record lows, while the stock market is close to record highs. Can this be happening in the same economy?

It can and it is. The University of Michigan’s consumer sentiment index is now at the lowest level ever, in data that begins in 1962. By that score, Americans are gloomier now than they were during the 2020 Covid pandemic, the 2008 financial crash, the 2001 terrorist attacks, the double-dip recessions that began in the late 1970s, and the oil shocks of 1979 and 1973, when gasoline rationing caused long lines at filling stations.

Stocks haven’t noticed, or if they have, they don’t care. The S&P 500 index has risen for eight weeks in a row, the best string of weekly gains since 2023. It’s half a percentage point from a new record high. It has done this with oil prices firmly above $100 per barrel for nearly three months and with President Trump’s Iran war reigniting inflation.

Can this last? Or does something need to give? It can probably last, for better or worse. Wall Street and Main Street are becoming two different worlds, and the widening gap we see now is the continuation of a long-term trend, rather than something new.

[The Weekly WTF: Bailouts for criminals]

Read more

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

The war with Iran that President Trump launched on February 28 has settled into a tense and costly standoff. Bombs are no longer flying, but Iran has de facto control over the Strait of Hormuz and a chokehold on world energy markets. Hardly any cargo is clearing the strait, with no end in sight. Investors and business owners want to look past the war, but sporadic surges in energy prices and other collateral damage from the war are still rattling markets.

Everybody knows the war has raised gasoline prices. It’s now affecting the economy in other serious ways. Here’s where we stand:

Oil prices jumped from about $68 before the war to as high as $110 in early April. Prices then dipped after Trump announced a ceasefire on April 7, and traders hoped that oil shipments through the strait would resume. They haven’t, and prices have drifted back up to the $110 range. Physical inventories are now running low, causing painful shortages of refined products such as jet fuel.

Gas prices have risen by about 50% since the war started, to a national average of around $4.50 per gallon. A $1.50 jump in gas prices costs a typical driver about $60 a month in higher costs.

Diesel prices have jumped too, and that’s making it more expensive to produce and transport food and many other products. That’s pushing overall inflation higher.

[Nobody’s fixing anything 😡]

Inflation is now growing faster than incomes, for the first time since 2023. This is a gloomy milestone that indicates the typical worker is falling behind.

Most economists think inflation will go even higher this year, since it takes a while for higher production and transportation costs to move through the supply chain, all the way to consumers. The Cleveland Federal Reserve’s “nowcasting” tool suggests inflation today is around 4.2%, up from 3.8% in the latest official report, which was based on surveys from mid-April.

There’s a nearly even chance inflation could hit at least 5% this year. Here’s how the odds of higher inflation have risen on the prediction site Kalshi:

Interest rates usually rise when inflation goes up, since bond buyers demand a higher return to compensate for the eroding value of money. The rate on the benchmark 10-year Treasury note has jumped from about 4% before the war to 4.6%, with rates on consumer and business loans rising in similar measure.

[The Weekly WTF: To hell with affordability]

Mortgage rates were slowly declining before the war, but have since gone back up, by about four-tenths of a percentage point. That raises the monthly payment on a typical mortgage by about $80.

Rates could go higher. Here’s how the outlook for mortgage rates has changed on Kalshi:

[5 things to know about this year’s midterm elections]

Stocks sank early in the war, then rallied after Trump announced the ceasefire. The AI boom is boosting earnings and growth, with many buyers reluctant to sit on the sidelines, even amid an energy shock. But the war is probably still depressing stock values. University of Michigan economist Justin Wolfers estimates that stocks are about 5% lower than where they’d be without the war. Stockholders are making good money, but they’d be making more if oil prices had never spiked.

GDP growth will probably end up lower because of the war. In late February, right before the war began, the Atlanta Federal Reserve’s GDP Now model estimated that first-quarter GDP growth would be 3.1%. The estimate declined as fighting raged for six weeks. First-quarter GDP growth ended up at 2% in the actual data.

The effects of the war could suppress growth for as long as the Strait of Hormuz is closed. Most economists don’t expect a recession. But consumer confidence is at recessionary levels and Trump’s approval rating is at its lowest point ever. The military outcome of the war remains uncertain, but economically, it’s a loser.

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Inflation is getting more serious. Stocks retreated on May 15 as inflation pushed interest rates to 15-month highs, which has implications for stocks and many other asset classes.

The inflation news is broadly problematic. The overall inflation rate jumped from 3.3% in March to 3.8% in April. That’s largely because of the Iran war, Iran’s closure of the Strait of Hormuz and soaring energy prices.

Inflation is probably going higher still. Wholesale inflation jumped from 4.3% in March to 6% in April. It costs more to produce and transport stuff because diesel fuel and most other forms of energy are suddenly a lot more expensive. Wholesale inflation usually becomes consumer inflation as producers pass it along. The Cleveland Federal Reserve’s Inflation Now tool estimates that inflation today is 4.2%. That would be the highest since 2023, when consumers were gasping from the soaring prices that tarnished Joe Biden’s presidency.

The latest price hikes represent an ominous inflection point for consumers: Inflation is now outpacing wage growth, for the first time since 2023. That means the typical workers is falling behind. And it’s not an anomalous blip. We’ve been warning about declining real-income growth for several months because it shows up prominently in our Better-Off Index.

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Wealth inequality has been worsening since digital technology became widespread, China became a manufacturing powerhouse, and much of the American working and middle class started falling behind. It’s a complex trend with no single cause. But the chief hallmark is living standards that are declining for a majority of Americans, prompting widespread gloom and in some cases fury.

Economists puzzle over consumer confidence readings that are dismal, even as the economy looks healthy on paper. But worsening wealth inequality goes a long way toward explaining why so many Americans are pissed off.

The following two charts show what may be the most important and dangerous trend in the US economy. The portion of national wealth—mostly real estate and financial assets—controlled by the working and middle class has been declining since the mid-1990s, according to Federal Reserve data. The sharpest drop-off has occurred during the last 20 years.

The richest 10% of Americans now own 68.3% nation’s assets, up 8 percentage points from the levels of 1990. The other 90% own just 31.7%, down from 40% in 1990.

The second chart shows the distribution of wealth by income level rather than wealth tranche, with slightly different thresholds. But the trend is the same. The portion of wealth owned by the top 20% of earners has jumped from 59.5% to 71.9%. The portion owned by the bottom 80% of earners has dropped from 40.5% in 1990 to just 28.1% now.

There’s nothing wrong with rich people in a capitalist society. The problem is that too few people are benefiting from a dynamic economy that is generating huge amounts of wealth. It’s popular to bash billionaires, as if they’re deliberately plundering the rest of us. But the real problem is a system that rewards breakneck innovation while doing little to help workers who get caught in the gears of change.

[Stock owners are pulling away from most other Americans]

Rising student debt loads and a lack of entry-level opportunities hold some younger workers back right out of the gate. Elevated real estate prices and a shortage of starter homes in many areas keeps lower-income Americans from building wealth through home ownership. More than half of Americans own stocks, mostly in retirement accounts. But the richest 10% of Americans own 87% of all stocks, which means a roaring stock market doesn’t do much to help the majority of Americans. The compounding wealth of the top 10%, meanwhile, fuels much of the spending that keeps the US economy growing.

Trump encapsulated the problem better than most politicians when he minted his trademark phrase “Make America Great Again” during his first presidential run. That harkens back to some unspecified time in the past when things were better. In 2016, Trump promised that “the forgotten men and women of our country will be forgotten no longer,” a direct appeal to blue-collar Americans who have watched their communities crumble as globalization sent millions of jobs overseas.

But Trump has done nothing to aid the working and middle class during more than five years on the job. The bottom 90% share of wealth hit the lowest level on record during Trump’s first term. It rebounded a bit after Joe Biden became president in 2021. But that was mostly driven by stimulus checks and other types of aid Congress passed amid the Covid pandemic. That largesse wasn’t sustainable, and once it ran out, the downward wealth trend for most Americans resumed. It is now headed for a new record low during Trump’s second term.

Trump’s focus on manufacturing jobs has been a total bust. There are nearly 5 million fewer manufacturing jobs now than there were in 2000, and those were once the good-paying jobs younger workers counted on to put money in the bank and save for the down payment on a home. Trump has raised tariffs and herded migrants out of the country, on the premise that better-paying jobs for Americans will somehow materialize. But they haven’t.

What Trump has really done is pursue pet causes while facetiously claiming they’ll help blue-collar workers. He loves tariffs because they let him micromanage the economy, and he doesn’t seem to care that they raise prices for Americans and reduce growth. He hounds migrants because it pleases the nationalists among his base, while peddling the fiction that Americans are going to step in to clean hotel toilets and pick fruit once the foreign workers are gone.

[The middling Trump economy, in 9 charts]

Did Biden do better, in between Trump’s two terms? You might think so, because he signed bills meant to stimulate factory construction, green energy production and other types of infrastructure. But it didn’t move the needle. Once the Covid aid was gone, the wealth gap continued to widen in 2023 and 2024.

The barriers to getting ahead are now generating self-defeating populism defined by tribal warfare among interest groups that does nothing to make anybody better off. Trump and other feral opportunists wage culture wars because their group needs to blame some other group for being stuck in a rut. But culture wars don’t boost paychecks or living standards, and trolling isn’t a skill most people can build a successful career around.

What is artificial intelligence going to do to wealth inequality? Probably make it even worse. The technology revolution contributes to the gigantic wealth gap because it creates a chasm in the economy. Technologists have all the latest tools and a constant edge. They will own the AI economy and capture the wealth it generates, which could be unimaginably huge. The analog sector will look in from the outside, as it has for most of the digital era, and wonder what went wrong.

[5 things to know about this year’s midterm elections]

What to do? One step would be a presidential administration with one priority above all others: Bringing more wealth to the massive majority and shrinking the wealth gap while protecting growth. Social and cultural causes, which tend to get canceled out when control of the White House changes parties, should be on the back burner.

There are many ideas for how to shrink the wealth gap. For starters, we should learn the lessons of the China Shock instead of repeating it with an AI Shock. It’s now well understood that the rapid outsourcing of manufacturing to China in the early 2000s ravaged many American communities and contributed to the growing wealth gap. The government could have managed that in a way that slowed the transition and provided better protections for displaced workers and their families.

There are a lot of people thinking about how to prevent AI from doing something similar. It will require a bigger safety net, including better tools to help more people find a place in the AI economy. History now proves this would be a lot better than simply letting workers flounder.

There should probably be higher taxes on the richest Americans, but they don’t need to be punitive. Top tax rates have been much higher in the past, when the wealth gap was more reasonable, and they didn’t stop America from being the world’s most innovative nation. New tax proceeds would be best spent on training and teaching, so that more workers have the skills for the economy of the future and don’t get stuck in the past.

We need more affordable housing. There’s a bill in Congress now that might help, but as is often the case, there’s a hostile minority faction standing in the way.

It might also help to stop fetishizing manufacturing as a cure-all for workers who don’t have a college degree. There’s no rule that says old industries must remain lucrative forever, and America’s industrial production remains steady even as payrolls have dropped. That’s efficiency, which we shouldn’t try to reverse. Better to funnel workers into the fastest-growing industries, at all levels.

Democrats got one thing right when they passed the Affordable Care Act in 2010. That law went from being unpopular to very popular because it lowered health care costs for millions of Americans. It also brought the nation closer to universal coverage, which ought to be an economic prerequisite allowing people to work where they can be most productive, not where they can get health insurance.

Republicans recently let some ACA subsidies expire, which is a step backward. It would benefit the entire economy if health care were something everybody could count on instead of a perk of working for a big organization. In addition to universal coverage, the other health care priority should be lowering costs throughout the system.

There’s a rich assortment of other ideas for how to better share the wealth at universities, think tanks, and even Wall Street investing firms. America has never lacked brainpower. But we sorely need fixers able to do what’s necessary instead of what is convenient.

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Trump should be bragging about the demise of inflation and campaign promises kept. While campaigning in 2024, he told voters he’d get prices down. Prices should be down, or at least flat. Virtually all of the price pressures that pushed inflation to 40-year highs during the Biden administration are gone.

But now there are new price pressures, courtesy of Trump himself. The inflation rate jumped from 3.3% in March to 3.8% in April, driven by the surge in energy prices resulting from Iran’s closure of the Strait of Hormuz. A year earlier, inflation was just 2.3%.

Trumpflation began with the tariffs Trump started imposing last year. Courts have struck down many of them, but the average import tax has still jumped from 2.4% when Trump took office to about 10% now.

The Trump tariffs have kept the cost of clothing, appliances, furniture, electronics and many other things higher than they’d otherwise be. They’ve helped push coffee and beef inflation into double digits. Trump insists tariffs aren’t inflationary, yet he’s planning to reduce beef tariffs to address high prices—a tacit admission that his own policies are costing people money.

The Iran war that Trump launched on February 28 is shaping up as the dumbest move by a president in decades, maybe since Herbert Hoover’s tariffs intensified the Great Depression in the early 1930s. Iran’s de facto closure of the Strait of Hormuz has sent oil and gasoline prices to the highest levels since 2022, the year inflation hit a 40-year high of 9% and gasoline prices hit $5 per gallon for the first time ever.

Everybody knows high energy prices are straining American budgets anew. What gets less attention is where inflation has subsided. Here, for example, are some of the major spending categories where inflation has dropped, paired with energy-related spikes.

The year-over-year change in rents has fallen from 8.8% in 2023 to just 2.8% now. Food inflation is less than half what it was three years ago. Car insurance premiums soared for a couple of years, but are now flat. Consumers would rather see falling prices, instead of smaller price increases. But low inflation still allows people to get ahead, as long as incomes rise by more than prices.

If Trump had imposed no new tariffs and left Iran alone, many Americans would have regained the ground they lost to inflation during the Biden years. The psychological scars of price shocks would be fading or gone.

Instead, prices are rising by more than incomes for the first time since 2022. When real income turns negative, as it probably is now, the typical American is falling behind, by definition. And there is probably worse inflation to come, as rising transportation and production costs work their way through supply chains, all the way to consumers.

Inflation comes with other costs not quite as visible as the gas prices plastered on billboards at every filling station in America. Inflation pushes interest rates higher, because bond buyers demand a higher return to compensate for the eroding value of money. So home and car buyers pay more. As usual, lower-income Americans get hit the hardest, with the higher cost of gas and household energy leaving less money for everything else.

Trump is obviously concerned. He wants to suspend the federal gasoline tax, which is 18.4 cents per gallon. But he probably can’t do that without Congressional legislation, and it might not pass. The gas tax funds the Highway Trust Fund, and some members of Congress will likely object to raiding a primary source of infrastructure funding. Congress did not suspend the gas tax in 2022, when prices peaked at $5 per gallon.

Iran, meanwhile, remains defiant. It seems to be weathering a US blockade of its ports and testing how much political pain it can inflict on an American president. Millions of consumers, unfortunately, are the conduit for that pain.

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Jobs, meh. Economists liked the April jobs report, because it “beat expectations.” But workers worried about stagnant pay and eroding job security don’t give a hoot about those types of numerical technicalities. And consumer surveys show most Americans find the job situation pretty disappointing.

The average forecast was for about 60,000 new jobs in April, and employers ended up creating 115,000 new jobs. So at the headline level, it seems like a win. Hiring expanded from a few narrow sectors earlier in the year—mostly health care and social services—to construction, retail, trade and transportation, and leisure and hospitality. The unemployment rate stayed steady at 4.3%.

But the trends are still lousy. Longer-term data shows the job market weakening, as you can see in the charts below. While job growth was pretty good in both March and April, the economy has shed jobs in five of the 15 months since President Trump took office in 2025. Employment growth has averaged just 31,000 new jobs per month since Trump became president. In 2024, it averaged 122,000 new jobs per month, nearly four times as much.

The unemployment rate has remained steady for the last several months, but it’s nearly a point higher than at the low in 2023, when it bottomed at 3.4%.

Trump’s tariffs are supposed to revive manufacturing, but there are fewer blue-collar jobs than when Trump took office.

Most of the hiring is still concentrated in health care and social services. There’s nothing wrong with those jobs, but they don’t boost the productive capacity of the economy like growth in other sectors might. There’s been a notable decline in business-service employment, a large sector with many good-paying white-collar jobs. Four other major sectors have lost jobs during the last year.

[Get all the facts on the middling Trump economy]

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Stocks defy gravity. It’s hard to think of a time when the stock market levitated so far above the real economy. The Trump energy crisis is stoking inflation and causing lots of pain for businesses and consumers. Yet stocks are hitting record highs and basically blowing off concerns about the energy crisis. There are two questions: Is it real? And can it last?

On the first one, the stock rally is definitely more real than the dot-com boom of the late 1990s, which led to the dot-com bust of the early 2000s. Stocks are going up because earnings are strong and analysts keep raising their expectations for future earnings. These are not phantom companies that might be profitable someday, like many of the dot-com darlings were. These are profit juggernauts such as Alphabet, Apple and Microsoft, which faced rigorous earnings expectations this week—and exceeded them. These companies are both investing heavily in the artificial-intelligence buildout, and benefiting from it.

Here’s what Microsoft CEO Satya Nadella said this week: “We are at the beginning of one of the most consequential platform shifts that will change the entire tech stack.” If Nadella is right about the AI revolution being at the beginning, it makes sense that stocks would be roaring.

[These 8 charts explain why stocks are rallying in the midst of a war.]

Can it last? The AI transformation will definitely be lasting. Nobody knows if stocks are in a short-term bubble. But the fundamentals look pretty good. Patrick O’Hare of Briefing.com points out that the estimated growth rate of first quarter-earnings has soared from 12.5% a few weeks ago to 27.2% now. And it’s not just tech. “The salient point is that the earnings growth in other sectors has been much better than expected,” O’Hare wrote on May 1.

Skeptics ask how stocks can be soaring in the midst of an energy crisis. There’s another way to look at it: Without the Iran war and lofty oil prices, stocks would probably be doing even better.

For the week, stocks gained around one percent, with the S&P 500 and NASDAQ both hitting new record highs on May 1. From now on, our Saturday market summary will include charts showing stock returns by sector, based on data from S&P Global. It’s fun to look at how different industries rise and fall over time.

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During April, however, stocks staged a surprise rally that erased those wartime losses and turned stocks positive for the year. The S&P 500 index is now up about 4.5% in 2026, with a few sectors up by a lot more.

Some analysts don’t understand how stocks can blow off a global energy shock that’s raising costs for most companies, damaging consumer purchasing power and depressing growth. It could be that markets are too sanguine and stocks will drop anew.

But it’s also true that investors think huge gains lie ahead for the beneficiaries of artificial intelligence, with or without a war. Views change about who those beneficiaries are likely to be. But for now, investors have decided that the risk of missing out on huge AI-related gains outweighs the economic damage caused by the war. The war effects will (probably) be temporary. The transformative effects of AI will be lasting.

A few intriguing charts show how the AI boom temporarily became a sidestory during the first few weeks of the war—then roared back to propel stocks to new highs.

First, here’s the S&P 500 index for 2026. It was up by a fraction—basically flat—when the war started on February 27. From the start of the war through March 30, the S&P 500 fell 7.8%. Since then, however, the S&P has jumped by nearly 13%.

Stocks in most industries have followed the S&P. This chart shows eight of the 11 industries represented in the index: communications, consumer discretionary, consumer staples, financials, health care, industrials, real estate, and utilities. Nothing stands out, but that’s the point.

Now here’s the index with all eleven sectors. The additions include technology, materials, and energy. We’ve also added two subsectors, semiconductors and software, using the S&P Global subsector indexes. Ignore the muddle in the middle and focus on the standouts at the top and bottom.

[See the economic toll of the Iran war.]

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AI can guide weapons, make medical diagnoses, write term papers, and script TikTok videos. Some visionaries think it may some day perform the majority of the work in America.

So making me wealthy shouldn’t be that hard. There’s an almost unlimited amount of money in the world, and all I’m after is a little more than my fair share. An edge, as the hedge funders say. Isn’t that what AI is for? To give users an edge?

There are already plenty of AI apps for investors that are supposed to help you pick stocks, automate trading and conduct detailed research. I’m skeptical. Fees dominate the investing world and the more transactions you make, the more fees you pay. Plus, hedge funds and other institutional investors have the best trading technology money can buy, and no $49 app is going to outsmart them.

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