The Wrap: Trump Promises Dividends, Inflation Rises and Home Prices Slump
October 16, 2026 | In this special edition of The Institutional Risk Analyst, we provide a setup for the latest edition of “The Wrap” with Julia LaRoche and ponder the week of news developments from Washington & Wall Street.
Bread & Circuses: This week, President Donald Trump repeated his promise to give adult U.S. citizens a $5,000 cash "dividend" during a campaign event on October 12, 2026, reiterating that the payout is contingent upon Republicans maintaining control of the House and Senate in the midterm elections.
Bank Earnings: The largest banks reported generally strong earnings this week, but the stock market sold off on the news. Residential mortgage originations declined in the third quarter at Bank of America BAC), JPMorgan Chase (JPM) and Wells Fargo (WFC).
One exception to the positive earnings picture was Bank of America, which suffered a setback when the bank revealed a $1.2 billion fine by regulators for anti-money laundering (AML) violations.
The $2 trillion asset bank missed analyst expectations even after excluding the AML fine. These actions represent the third-largest penalty in Treasury history and the largest enforcement action penalty in the history of the Office of the Comptroller of the Currency (OCC).
Gina Heeb of the Wall Street Journal reported that “weak earnings coupled with a fine has analysts pressing executives about whether there is more pain to come" at Bank of America.
The answer is most certainly yes. As we have documented over the past few years, BAC is the worst performing bank in the top seven depositories by assets (“Bank Stocks Battered by Trump, Inflation and Interest Rates | BAC, C, JPM, WFC, USB, TFS, PNC”).
Private Credit: Josh Wander, 777 Partners co-founder, yesterday pled guilty in Manhattan federal court to charges including wire fraud, securities fraud, and witness tampering, with maximum penalties of 20 years per count.
Prosecutors had alleged that Wander defrauded investors and lenders of almost $500 million by sending doctored documents, misrepresenting asset ownership, and pledging the same collateral multiple times, while personally misappropriating $13.7 million from a lender.
Artificial Intelligence: AI and semiconductor stocks experienced heavy trading and a sharp market-wide sell-off since mid-October 2026), driven by rising inflation data, rising borrowing costs and bond yields and concerns about the prospect of regulation of AI.
Nvidia Corporation (NVDA), CoreWeave (CRWV), Broadcom Inc. (AVGO), Advanced Micro Devices (AMD), Micron Technology (MU), and Sandisk Corp. (SNDK) all saw significant declines over the past week.
Zero Hedge notes: "There are 20 project-finance data center bonds in the junk bond market for $45.6 billion backing just over 4GW of capacity across eight tenants, with CoreWeave the tenant on seven of them and many already yielding in the low-to-mid teens..."
"China’s overall sentiment toward artificial intelligence is characterized by high public optimism, strong state integration, and national pride, standing in sharp contrast to the more cautious or dystopian views often seen in the West," writes Artificial Inquiry. One veteran China expert, however, suggested to The IRA this week that “the Chinese won't escape 2027 without a major AI incident, at which point their views will shift.”
Mortgage Meltdown: We reported on the Mortgage Bankers Association Annual meeting in Chicago this week and predicted more trouble for the industry ahead (“Mortgage Notes: Falling Volumes, Rising Defaults; Will UWMC Survive?”) Significantly, several prominent attendees are predicting falling home prices in 2027 and 2028, though less than we had previously expected.
Gold: Over the past five trading days, gold prices experienced volatile, two-way trading driven by U.S. inflation data, volatile bond yields, and currency fluctuations. Spot and futures gold prices are hovering around $4,146 to $4,173 per troy ounce.
Inflation: The September Consumer Price Index (CPI) report, released by the Bureau of Labor Statistics, showed headline inflation rose 3.7% year-over-year and 0.6% month-over-month, driven largely by a spike in energy and gasoline prices.
Diesel fuel prices average about $6.30 per gallon according to data from AAA, up roughly 66% to 70% since the start of the U.S.–Israel/Iran conflict. Prices vary heavily by region, with states like California seeing retail averages surge past $8.00 a gallon, while Florida sits closer to an average of $6.12 a gallon.
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