Donald Trump: Stupidity Causes Inflation, Stock Market Should Rise
U.S. President Donald Trump commented after the August non-farm payroll report: growth does not cause inflation, stupidity does; today's employment figures far exceeded expectations, and the stock market should have risen instead of falling.
The Bureau of Labor Statistics reported that non-farm employment increased by 162,000 in August, significantly higher than the market expectation of about 55,000 to 56,000, with the unemployment rate steady at 4.1%. He called this an "excellent employment number" and blamed the market for weakening due to inflationary thinking upon seeing good data.
The three major indices subsequently fell. During the session, the Dow Jones dropped about 0.3% to 0.7%, the S&P 500 fell about 0.2% to 0.5%, and the Nasdaq had a smaller decline; the yield on the 10-year U.S. Treasury rose to about 4.77%, and CME Fed Fund futures indicated the probability of a 25 basis point rate hike on September 16 increased from about 49% the previous day to about 58% to 65%.
Inflation remains above the Federal Reserve's 2% target. The July CPI year-on-year was about 3.4%, with PCE readings even higher; inflation has been above the target for about 65 consecutive months. He also demanded that the U.S. should enjoy the lowest interest rates globally, stating that for every 1 basis point increase, U.S. debt interest payments rise by about $65 billion annually.
The White House narrative frames strong employment as credit improvement, while the market interprets the same set of data as giving the Fed more room to prioritize combating inflation. The previous day, Fed Governor Christopher Waller had signaled "if prices continue to cool, we can hold steady," leading to a brief rise of over 1% in stock indices, which was countered today by the better-than-expected employment figures.
In market mechanics, buyers are still betting on AI capital expenditures and large tech funding, while sellers are interest rate-sensitive growth stocks and duration assets. This is typical data-driven trading: better-than-expected employment raises the probability of rate hikes, increasing the discount rate and lowering valuations. Beneficiaries are short-term dollars and some banks' net interest margin trades, while those under pressure are the stock market and fiscal interest expenses reliant on low-rate discounts.
Source: Public Information
ABAB AI Insight
Trump attributing inflation to "stupidity" is not a new rhetoric, but rather a continuation of his attacks on the Federal Reserve since his first term, now linked to tariffs, Middle East conflicts, and capitalized investments. He previously stated "I love inflation" when CPI rose to 4.2%, later reversing to say "prices are rapidly falling"; the function of this same rhetoric is to shift price responsibility from administrative decisions to the monetary policy committee.
The capital path is straightforward: the White House wants low interest rates to sustain trillion-dollar fiscal and AI infrastructure, while the Fed aims to push core inflation back below 3%. An increase of 162,000 jobs is a vote for fiscal policy, while for bonds, it means rate hike options being exercised. The claim that every 1 basis point corresponds to about $65 billion in interest essentially politicizes the duration cost of government bonds, forcing the long end of the market to yield to policy goals.
This is analogous to Nixon pressuring the Fed in the 1970s and the post-pandemic narrative of "good employment should be celebrated" in 2020-2021. At that time, there was also an inversion where "good data turned into bad stock prices." The current industry position is not at the beginning of an expansion but rather in the latter half, where valuations are high and debt financing supports data center expansion: raising rates does not need to create a recession; simply increasing financing costs can interrupt this round of capital expenditure.
Structural changes involve a transfer of pricing power. Whoever has the authority to interpret "good employment" also has the power to determine the discount rate. The mechanism is that the dual mandate will inevitably clash in a low unemployment, high inflation environment: the president uses employment to prove prosperity, while traders calculate rate hike paths based on employment; ultimately, pricing is determined not at press conferences but in Fed fund futures and 10-year Treasury bonds.
ABAB News · Law of Cognition
If good data raises the discount rate, it will turn into bad stock prices.
Growth does not automatically create inflation; policy combinations do.
Interest is a harder budget constraint than slogans.