"In the meantime, our great military is Loading Up and Resting, looking forward, actually, to its next Conquest. AMERICA IS BACK."  — President Donald Trump, posted on Truth Social, April 8, 2026

 

America, as the president posted, is back. But the critical question is: Back to what? For the first time since Vietnam, we are entering a wartime economy — a shift with vast consequences, the most significant of which is inflation.

 

As the president prepares the armed services for his next conquest, estimates are that the Iran War costs the U.S. about $1 billion per day. This amount does not include other economic costs, such as higher energy prices and fertilizer costs.

 

The serious consequence of a wartime economy will be rising inflation. History is clear: war is always inflationary. Enormous fiscal spending and monetary expansion guarantee price spikes, worsening when the economy is already expanding. This, combined with our $38 trillion national debt, magnifies the economic challenge ahead.

 

My experience of a wartime economy during the Vietnam era ended in crazy inflation. President Lyndon Johnson refused to raise taxes to fund the war. He also spent billions to expand his Great Society program. This "guns and butter" strategy led to double-digit inflation and years of stagflation.

 

Aside from inflation, if history is any guide, unemployment would fall, especially if the U.S. instituted a draft next year, which looks increasingly likely. Employment might rise across the labor force if there are enough recruits to fill the military's quotas and if there are enough workers to replace them.

 

The administration has already raised the maximum recruitment age to 42 from 35. There is also a plan to make registering with the Selective Service mandatory for all Americans of draftable age by the end of this year. Manpower may still be a problem unless Trump relaxes his immigration policies to find new recruits for the military and the labor force.

 

And who will fight these wars? Look no further than the younger generations. The sad fact is that the young have always provided the cannon fodder for nations at war. Incentives are growing. It was no accident that service members received a $1,777 after-tax present from the president last Christmas. He also wants to increase wages for those in the lower echelons of the military.

 

As for other areas of the economy, labor might see an uptick among defense contractors, arms manufacturers, cybersecurity firms, and energy exporters, but AI would likely significantly reduce the workforce required. The administration has already asked several manufacturers to increase their roles in military production. General Motors, Ford, GE Aerospace, and Oshkosh are just some of the companies asked to divert more of their output to the wartime economy.

 

I date the Russian invasion of Ukraine during the Biden administration as our entry into a war economy. Until now, the great powers — the U.S. and China — have used proxy wars rather than face-to-face conflict. Ukraine, our proxy, has received trillions of dollars in U.S. aid. Russia (China's proxy) now spends over 7 percent of its GDP fighting them. Since then, American war spending has spread worldwide. This now includes money for Lebanon, Gaza, Syria, Israel, Venezuela, Iran, Ukraine, and soon Cuba. That is only a partial list.

 

Europe is also entering a wartime economy. NATO members have pledged to spend 5 percent of GDP on arms and security. As in the U.S., this requires deep cuts to social welfare and health care. It also crowds out private investment.

 

Over the last year, a strategic plan has also been forming within the EU for a new European-only NATO ( excluding the U.S.). Germany and France, among others, are already preparing their own military conscription programs. Germany, for example, is switching from cars to cannons and reinventing itself as a weapons manufacturer.

 

In this wartime economy in the U.S., American taxpayers and consumers will likely bear the greatest burden. Purchasing power, already reduced by higher prices — especially for fuel — is slowly declining. Expect more of the same. As for investments, protection will come from owning assets that benefit from wartime and inflation.

 

The bulls had their day in the sun this week. In a historic move, equity indexes roared back on a 13-day run that has wiped out all this year's losses and then climbed to new highs.

 

The move has been straight up since the lows of March 31. It was one of the fastest V-shaped recoveries the stock market has experienced since the 1950s. Those chart technicians who advised clients to wait for a pullback before committing money were blindsided.

 

I had warned skittish investors that a cease-fire or progress in ending this war would be a catalyst for an upside explosion. "The bounce should be breathtaking, and if you are not invested, you will miss it. There won't be an opportunity to chase," were my words written in my March 20th column. I hoped you listened.

 

I will call it the "Great Escape" and the fastest short-covering rally since 1950. The fact that there is no peace treaty but only a truce that expires in one more week means little. Why? Because at this point, financial markets have now gleaned that there is a huge difference between what the president says and what he does or does not do. You don't have to be political to recognize this.

 

The "blockade" of the Strait is more words than actions. Yes, ships are passing through, but traffic is heavily restricted and limited to vessels from a few nations. Nine tankers carrying crude and other cargoes have passed through unmolested. That is 90 percent less than when the conflict started. Supposedly, negotiations with the Iranians are ongoing, but no date has been set for further talks.

 

Israel and Lebanon have agreed to a 10-day ceasefire, and the two countries' leaders are scheduled to meet in Washington next Wednesday. That gives Trump the opportunity to show progress, if not with the Iranians, at least with the Lebanese. Of course, the Hezbollah are not included. Who are the Israelis fighting? You can't make this up. In any case, the announcement sent crude oil plummeting.

 

The decline in oil remains critical to the stock market's fortunes. I have advised readers to watch oil prices as a guide for stock direction. By mid-morning Friday, West Texas Intermediate (WTI) is trading down 12 percent at $83.33/BBL, while Brent crude is at $89 a barrel. Is it any wonder the S&P 500 is up 1.3 percent?

 

We also kicked off the first-quarter earnings season, and although it's early, results from financial companies and some other major companies have been strong. Next week, almost 20 percent of the S&P 500 are set to report. More importantly, Google, Amazon, and Tesla will test the market's newfound optimism.

 

Technology — especially semiconductors, AI darlings, and most of the MAG 7 — has led this bull run. Once again, current quarterly earnings and sales matter less than management's guidance about the future.

 

On Friday of last week, I wrote: "I need to see the NASDAQ's QQQ ETF decisively break above 615 to get more bullish." That happened on Monday. The Qs are now sitting at 648 while the S&P 500 is trading at 7,133. A fully extended rally could take us as high as 7,250 in a blow-off late-stage rally. I could be dreaming because this "V" has already pushed the limits, but let's ride it while we can.

 

Remember, this whole move can still turn on a dime with just one launched missile. We are still in the hope stage, and hope is not an investment strategy.

 

In April, the White House asked Congress for $1.5 trillion more in defense spending for 2027. This is a 40 percent increase over the Pentagon's spending in fiscal year 2026. Half the funding will come from cuts to education, housing, and health programs. Welcome to the war economy.

 

While the stock market celebrates another two-week extension of a cease-fire between the U.S. and Iran, the wars are not over. There will be more, in my opinion, and preparing for them will cost money. The Pentagon needs $4.5 billion to replenish its Tomahawk cruise missile stockpile. The Navy wants more boats, and the $250 million in planes and helicopters we lost rescuing two downed flyers need to be replaced.

 

As more military resources disappear, the need to replace them grows. That never-ending story fuels a wartime economy. The money earmarked for defense may not be enough. At a private lunch last week, according to the New York Times, the president said we need to prioritize military protection. Otherwise, he said in a since-deleted video, the country could not continue to shoulder the financial burden of services including day care, Medicare, and Medicaid.

 

For those, like my daughter, who vaguely remember the term "wartime economy" from their history books, let me start with a definition. A wartime economy is an economic system that is reorganized by a nation to prioritize military production and resource allocation during periods of armed conflict.

 

What that means is that all the resources, including production, distribution, and financial systems, are adjusted to support military efforts while maintaining overall economic stability. If you are old enough to remember, it can and did mean rationing, price controls, centralized planning, inflation, and deficit spending here in the U.S.

 

For Americans, World War II is usually the go-to example of a wartime economy. Defense spending surged from 1.6 percent of Gross Domestic Product (GDP) in 1940 to over 40 percent four years later. By the end of the war, that number climbed to 119 percent of GDP. Non-military auto production was halted. Steel, rubber, and aluminum were rationed. Price controls artificially suppressed inflation, and black markets in everything from food to fuel proliferated.

 

Historians say this wartime economy pulled the U.S. out of the Great Depression. It sped up GDP growth and built the military-industrial complex. The war and draft created a job boom. By 1944, unemployment fell below 1 percent, the lowest ever. Women joined the workforce in large numbers. War also sparked major advances: radar, jet engines, computers, medicine, and the nuclear bomb.

 

All this is true; however, that is not the whole story. Under the hood, both private consumption and investment lagged badly. Civilian living standards were lower during the war than in 1940. That was before rationing and quality deterioration.

 

Much of wartime economic growth came at the private sector's expense. Tanks, ammunition, ships, and planes — many lost in combat — could have built schools, hospitals, housing, or consumer goods. Instead, Americans waited in line for basics like gasoline, meat, and shoes. The national debt more than doubled as a share of GDP during the war.

 

Could we see the same results 80 years later? It seems doubtful. War may not deliver the benefits people expect. War spending gives an output boost, and we may fight for a "good cause," whatever that means now. Yet do not expect the same job gains as before.

 

Next week, I will address the inflationary fallout from wartime economies and how countries worldwide are being forced to alter their own economies due to shifting post-war strategic alliances and geopolitics.

 

Markets are betting that a ceasefire will hold between the U.S., Iran, and maybe even Israel. They are also gambling that the outcome of this weekend's negotiations between those parties will end with the opening of the Straits of Hormuz.

 

Place your bets, ladies and gentlemen, black or red. In the meantime, we wait for the next social media post to determine which way the markets and your fortunes will go. I continue to keep my eye on the ball, which is the price of crude oil, although I have noticed that the price of equities and the price of crude are beginning to decouple.

 

This week, an 18 percent decline in West Texas Intermediate (WTI) equaled an almost 3 percent gain in the stock markets. Don't be misled by those gains. They weren't based on anything fundamental. The rise came from short covering — traders who had bet against the market buying shares to cover those bets. The president's post on Truth Social, vowing that "a whole civilization will die tonight," drove traders to hedge their positions by shorting the market. What choice did they have when the leader of the so-called "free world" made such a threat?

 

Sure, it was likely to end in another Trump TACO before the Tuesday night deadline (which it did), but professionals couldn't risk Trump actually following through on his threats. When he didn't, traders who had shorted the market had to quickly cover their positions — a process known as covering shorts. That, my readers, is why the S&P 500 and other indexes rallied.

 

And now back to reality. The Fed's key inflation index, the Personal Consumer Expenditures Index for February, rose 0.4 percent versus 0.3 percent in January. That's the steepest monthly increase in a year and right in line with my expectations. Higher costs in motor vehicles and parts, recreational goods, gasoline, clothing, and food were fueling inflation.

 

U.S. personal incomes in February fell, while personal spending rose. Fourth-quarter 2025 GDP was further revised downward, to only a 0.5 percent gain. While the administration blamed the entire decline on the government shutdown, the real driver was a cooling of consumer spending, investment, and exports.

 

I know none of this matters to most market participants right now, but in time it will. The Consumer Price Index (CPI) for March was also higher than expected. Headline CPI was 3.3 percent higher than a year ago. It was the largest monthly gain (+0.9 percent) since 2022. The spike was almost all attributable to gasoline prices. Just wait until you see the next report!

 

You can forget any Fed interest rate cut as a result, at least until the new Fed chair arrives in May. At that point, we will see how much independence the Federal Reserve Bank has left. There would have been a time when I would have led with the CPI news in this column, but the talks with Iran are what investors are most worried about right now.

 

A weakening economy and rising inflation will have to wait until we know whether there will be a workable ceasefire, the opening of the Straits, and relief from rising energy prices. Right now, the market's reaction to the high inflation numbers tells me the numbers were already priced-in. It could also be that investors believe this inflation spike is transitory and will fade as the price of oil fades. 

 

The S&P 500 has recouped almost all its year-to-date losses over the last two weeks. That is a good sign, and if next week sees the indexes continue their bullish climb, I may start to breathe a bit easier. I need to see the NASDAQ's QQQ ETF decisively break above 615 to get more bullish. Otherwise, this rally is simply a bounce in a bear market. Color me cautiously optimistic.

 

By now, everyone understands rising beef prices are a never-ending story. Fewer consumers complain about seafood prices. That may change as sticker shock hits the fish counter.

 

The U.S. Bureau of Labor Statistics reported that fish and seafood prices increased by 3.89 percent so far in the first quarter of 2026 compared to prices in 2025. During the same period, the overall inflation rate was 1.19 percent. Of course, that was small potatoes compared to the price of beef, which surged 13 percent amid strong demand and tight supplies.

 

For the rest of this year, the U.S. Department of Agriculture expects seafood prices to rise faster than the historical average of 4.60 percent per year. For as long as I can remember, seafood in the U.S. has been a luxury item that, year after year, has climbed in price. Prices for fresh fish and seafood are 133.51 percent higher in 2026 than in 1997. In 2024, seafood had the highest average retail price among protein sources, surpassing beef and veal.

 

Beef, on the other hand, remained low and within the means of most Americans until recent years. Part of the price difference is attributable to growing demand for seafood in the U.S., one of the world's largest seafood markets. However, 90 percent of the seafood consumed is imported from other countries.

 

It was not until I began traveling the world in my teens that I realized that, in many countries, seafood was both cheap and plentiful. China, Indonesia, and Vietnam are the top suppliers of our fish, and all of them have been slapped with high tariffs thanks to Donald Trump. But don't just blame Donald Trump for the rising prices.

 

In recent years, consumers worldwide have begun paying more for fish. Climate change, despite deniers, has had a profound impact on the world's oceans. Rising temperatures and acidification are impacting the distribution and abundance of many underwater species. Just look at the Gulf of Maine as an example. The warmer water has led to a decline in the lobster population to the point where I paid $49 for a lobster roll last weekend in Martha's Vineyard.

 

Over the last six years, Maine's lobster catch has declined from 121 million pounds to 79 million. This drop reflects a broader regional shift, as the Gulf of Maine has been leading the oceans in warming driven by climate change. As a result, the codfish industry has been decimated, while shrimping has gone nowhere as marine life fled to cooler waters. Similarly, salmon populations in the Pacific Ocean are experiencing the same trend.

 

On a trip to visit relatives in Norway a few years ago, I also learned that many species are affected by pollutants such as plastics, pesticides, and industrial waste. Thanks to ocean currents, much of the world's ocean trash is winding up in the Scandinavian region. This has led to increasing regulation and certification as governments try to reverse this trend. The costs are passed on to consumers through higher prices and a smaller supply of fish.

 

Beyond production, the costs of catching fish are steep: harvesting is more labor-intensive, product spoilage occurs faster, and loss rates are higher at every stage from ocean to plate.

 

A pound of ground beef might cost $6.75 per pound, but a comparable portion of fresh salmon or cod will run you anywhere from $8 to $14 per pound. A whole chicken is even cheaper, about $2 a pound. The difference between catching fish and raising cattle, pigs, and chickens is that ranchers and farmers use a controlled environment to optimize feed, breeding, and growth timelines. Wild-caught fishing offers none of the above.

 

Commercial boats depart with a fully paid crew, fuel accounting for 5-10 percent of their earnings, ice, and refrigeration units, and face increasingly uncertain weather, shifting fish populations, regulations, and seasonal closures. There is no guarantee of a full catch, whereas a rancher can be certain of how many pounds of beef he will produce in a month.

 

At the supermarket, beef and chicken have much longer shelf lives as well. Fresh seafood is one of the most perishable items on a grocer's shelves. Anywhere from 8 to 20 percent of seafood is spoiled before it reaches consumers (the shrink rate). Supermarkets know this and mark up their fish to account for that spillage rate. Frozen seafood has a near-zero shrink rate, which is why it is much cheaper than fresh fish.

 

And keeping fish cold is expensive. Most commercial fishing takes place far from supermarkets. Many products, such as wild salmon, Atlantic cod, and imported shrimp, may travel thousands of miles by boat, truck, and air before hitting your local grocery shelf. At every step in the chain, keeping fish cold requires energy, specialized equipment, and speed. Unlike beef, which spoils more slowly, fish spoils quickly if it is not handled precisely.

 

Another difference between fish and a steer is that you get a greater yield from the beef carcass. About 63 percent of its live weight is boneless beef. A whole fish yields far less. No more than 30-50 percent of the fish is edible. If demand for wild-caught fish picks up, you can't just catch more. Harvests are constrained by quotas, seasonal availability, and the sheer biological limits of fish populations.

 

It is the reason aquaculture has exploded worldwide, with fish farms popping up everywhere. Today, roughly half of all seafood consumed globally is farmed fish. Fish farms can scale up like livestock if demand rises. That's why tilapia and catfish, for example, are much cheaper than wild salmon, cod, and shrimp. 

 

When it comes down to it, you may have noticed that not all fish are expensive. Canned tuna is practically a loss leader, with cans going for a dollar or less. 

 

The price differential between fish and meat is really a gap between industrialized livestock production and wild-caught fresh seafood. The more you consume farmed fish that is frozen for transport or canned, the cheaper it becomes.