US Stocks Have Beaten Inflation by 14.76% as Trade Deficit Hits $118.8 Billion

• US stocks beat inflation by 14.76% in 2025, with the S&P 500 delivering strong real returns
• The US trade deficit jumped to $118.8 billion in July, up 17% from the previous month
• Rising imports, including an 11.3% surge in capital goods, add a new economic wrinkle for the US stock market

US stocks have had a strong run, even after taking inflation into account. The S&P 500 posted a 14.76% real return in 2025. This gives investors a notable gain after adjusting for rising prices. At the same time, the latest trade figures are heading in the opposite direction. The US trade deficit jumped to $118.8 billion in July, with imports doing much of the heavy lifting.

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US Stocks Are Still Beating Inflation

A 14.76% gain after inflation is a pretty meaningful number. It means investors weren’t simply watching their portfolios rise because prices across the economy were rising too. The US stock market delivered a sizeable return after stripping out the effect of inflation. The S&P 500 gained 16.39% in 2025, according to S&P Dow Jones Indices.

The index has kept moving higher in 2026 as well. As of August 26, its year-to-date price return stood at 12.13%.

This strength has come despite plenty of reasons for investors to be cautious. Interest-rate expectations have shifted, inflation remains a concern, and the economy is dealing with a widening trade gap.

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The $118.8 Billion Trade Gap Stands Out

The US trade deficit reached $118.8 billion in July, an increase of $17.4 billion from June. Imports rose to $318.2 billion, while exports came in at $199.4 billion.

One figure buried inside the report is even more interesting. Capital-goods imports jumped 11.3% during the month, marking their biggest monthly increase since 1993.

This points to more than Americans buying foreign consumer products. Companies are also bringing in large amounts of equipment and technology, including computers, semiconductors, and telecommunications gear. With businesses continuing to spend heavily on AI infrastructure, that part of the import data is worth keeping an eye on.

The wider trade deficit does not automatically spell trouble for the US stock market. The US has run goods deficits for years, and American companies can benefit from cheaper or more productive imported equipment. US stocks are producing strong returns after inflation, while imports are surging and the trade gap is getting wider.

Earnings and business investment are keeping US stocks on solid ground for now. Higher inflation and interest rates could make that harder to sustain.

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