Larry’s Note: Market turmoil equals trading opportunity.

That’s why I worked hard to capitalize on the ups and downs we experienced earlier this year. And I suspect there’s more chaos to come.

With President Trump in the White House, uncertainty reigns. Will he let tariffs stick next month… or will he delay them again? Will he interfere in the Iran-Israel conflict… or is it all bluster?

Just about every move he makes – even something as minor as a social media post – has the chance to rock the markets.

That’s why I want to make sure you’ve got trading expertise on your side as you maneuver in this environment. So on June 26, at 2 p.m. ET, I’ll show you one of my favorite trading strategies… and how we’re able to target 52 specific days when Trump’s administration is going to create opportunity.

To catch all the details, all you have to do is RSVP right here with one click.

The Fed’s Biggest Inflation Fear

By Larry Benedict, editor, Trading With Larry Benedict

President Trump was right.

He predicted that the Federal Reserve would hold rates steady last week. That’s exactly what happened when the central bank voted to keep short-term rates at a range of 4.25-4.50%.

In the same speech, Trump also called Fed Chair Jerome Powell “stupid” and said that he’s “costing the country a fortune.”

The pressure is on. Trump wants the Fed to cut interest rates. By leaving rates unchanged, the U.S. has the highest policy rate compared to any other developed economy.

Short-term interest rates also sit well above inflation levels, which historically has been a green light to lower rates.

But a dual threat to the inflation outlook means the Fed can’t afford to budge… and that has massive implications for investors.

Pressure to Cut

Inflation skyrocketed following the pandemic. Massive government stimulus spurred spending, and a disruption in global supply chains caused shortages of goods.

The Consumer Price Index (CPI) is a popular way to track consumer inflation. It started rising in 2020 and peaked at 9.0% in June 2022. That was the highest level since the early 1980s.

In response to rising inflation, the Fed jacked interest rates to the highest level in over 20 years. The Fed funds rate peaked at 5.50%.

Since mid-2022, though, inflation levels have been easing. That allowed the Fed to cut rates by 1.0% last year.

But it soon stopped because of stalling progress on inflation.

Of course, inflation has started moving lower again in recent months. The CPI came in at 2.4% for May. That’s getting closer to the Fed’s 2% inflation target.

And relative to inflation, short-term rates are the most restrictive since around 2008’s financial crisis. Take a look at the chart below:

(Click here to expand image)

It shows the difference between the Fed funds rate and inflation. The Fed funds rate is way above inflation at the moment.

Based on that evidence, there’s room for the Fed to cut further. Compared to other developed economies, the U.S. has the highest policy rates in the world.

The European Central Bank has cut interest rates eight times… slashing its policy rate in half to 2.0% since 2023.

But despite Trump’s demands, the Fed faces a dual threat.

That could spell bad news for investor portfolios.

A Dual Threat

Inflation has been creeping back toward the Fed’s target. But a dual threat could put that trend in danger of reversing.

The first threat comes from tariffs. Even though the market seems to have forgotten about tariffs, we’re quickly creeping up on the end of the moratorium. Unless there’s another delay, they’ll kick in on July 9.

And Powell’s comments following last week’s meeting reveal the central bank is deeply concerned about the inflation impact. Powell stated that “we expect a meaningful amount of inflation to arrive in coming months” due to tariffs.

The second threat comes from escalating tensions in the Middle East. Since the region is a key oil and gas hub, the conflict is sending energy prices higher. That could stoke inflation as well.

Worse, some evidence suggests that inflation is already heading higher.

The Fed’s Cleveland district publishes a real-time estimate of consumer inflation. Their current forecast shows that CPI has increased to 2.6% in June.

That might not sound like much, but if the trend continues, inflation could be in the early stages of turning higher.

The last time inflation spiked higher, the S&P 500 fell 25% from its peak in 2022.

If inflation takes off again with interest rates already running high, investors could face another tough market ahead…

Happy Trading,

Larry Benedict
Editor, Trading With Larry Benedict