Weak economic data hits the stock market hard

The final inflation report voters will see before the 2026 midterms showed prices rose even faster than expected in September, another blow for Trump and Republicans as they face significant headwinds in an election focused heavily on affordability.

The Consumer Price Index (CPI) released on Wednesday morning, reflected that consumer prices rose 0.6 percent in September, compared to 0.4 percent the month prior. On an annual basis, headline inflation accelerated to 3.7 percent from 3.4 percent. On Thursday, Producer Price Index (PPI) revealed that producer prices rose 1.3% on a monthly basis in September, accelerating at a clip more than twice as fast as the increase recorded in August. Producer price inflation is particularly frightening as the consumer price index will reflect that rise in higher price of consumer goods in a few months.

The University of Michigan’s latest consumer sentiment index showed that assessments of current economic conditions slipped to a record low of 44.7 in October from 50.9 in September. The Volatility Index (VIX) surged roughly 30% on Friday afternoon to trade above 21, reaching a more than four-month high as tech stocks continued to struggle.

For the week, the Dow added 0.67%, the S&P lost 1.95%, and the Nasdaq plunged 4.48%.

Future Wealth’s View

Our report last week was titled “Inflation will determine the midterm elections”. Link to the article is here – https://futurewealthllc.com/inflation-will-decide-the-midterm-elections/. We had stated that “As long as the stock market continues to reach new highs, the economy will be resilient enough to withstand the shocks of higher interest rates and higher inflation.” The stock market and entire US economy is sitting on a chair with one leg for support – AI capex spending. If interest rates keep going higher for longer, AI could become the part of the economy that breaks and will likely take the stock market with it.

With gas prices continuing to climb, inflation shows no signs of slowing down and the Fed will be forced to raise interest rates once again. While prevailing wisdom would encourage them to raise rates at the next meeting on Oct 28, no one wants to be fodder for the midnight tweets ahead of the elections.

In the middle of economic chaos facing the nation, Trump tweeted earlier this week that Russia and Ukraine had agreed to an Energy ceasefire. The only problem with that tweet was that neither Russia or Ukraine agreed to a ceasefire. In fact, they were not even aware of any agreement. And the bombings continued this week. Trump lives in a world of self made delusion of wealth, power and image when the greatest accomplishment in his life could’ve been as a worthy and respected President.