There are many views in the market today regarding the new potential tariffs being planned by the newly elected United States administration. Economists collectively agree that these tariffs will lead to a new wave of inflation in the economy, as the price of everyday goods will increase significantly. While sound theories lead to this conclusion, there’s another side to this coin.

If economists were right in their assumptions, at least regularly, they would be the ones running the hedge funds and investment vehicles of Wall Street. This is why investors should do their homework and not blindly assume these economists will be right. To do this, price action must be analyzed in various asset classes, especially those deemed inflation-sensitive.

For starters, the price action in the SPDR Gold Shares (NYSEARCA: GLD) and the iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) will serve as an inflation gauge for investors to keep track of. Then, as most economists suggest that fuel costs will be on the rise as well, the price action and reaction in the United States Oil Fund (NYSEARCA: USO) is also of great importance, with a final measure to be taken from the dollar index itself, the asset class at the center of inflation.

Price Action Indicates Low Inflation But Signals a Surge in Domestic Business Activity

When tariff news was announced and the new administration was elected, the market reacted in a way that signaled the opposite of inflation: new potential business activity for domestic names.

More specifically, the price of gold has seen some headwinds at the $2,650 area, failing to follow through and see $2,700 again; this is far from the type of price action that reflects higher inflation expectations, as gold prices usually are the first to react to inflation measures and outlooks.

While gold’s price action by itself doesn’t mean much, investors can take it into context alongside the price action in the bonds ETF. Recent rallies, while gold prices pull back from recent highs, have sent bond yields lower at the same time. When bond yields decrease, it typically signals that the market expects lower inflation ahead.

Again, this is far from the price action that investors would expect if inflation outlooks were as certain as economists today make them out to be. Connecting gold and bonds makes a lot more sense, but it still doesn’t give investors the full picture.

This is where oil prices come into play as another sounding board in the broader economic machine. If inflation were to take on an uptrend, then oil prices would have probably rallied alongside a bond selloff and a gold uptrend, but that’s not the case. Oil prices have struggled to break—and stay—above $70 a barrel recently.

Ultimately, the dollar is at the center of all this price action, and investors can see the 7% rally in the dollar index over the past quarter as a sign of economic strengthening, not inflation. So now investors have two schools of thought to follow and make their investment decisions.

On the one hand, economists are calling for inflation to surge again due to tariffs on Canada, China, and Mexico. On the other hand, the market is not reacting in a way that proves this belief right. Otherwise, the price of oil and other commodities, not to mention bonds, would reflect it.

Individual Stocks Signal a Potential Rise in Domestic Business Activity Soon

The market is saying through this price action that the manufacturing sector has been in a 24-month contraction, as judged by the manufacturing PMI index. However, recent price action in transportation stocks could signal a potential turnaround in the index and the sector.

If tariffs are implemented, and the risk of less trade and higher prices enters the economy, domestic production becomes a viable solution to this problem. This would create jobs, internal business activity, and great investment opportunities in the space.

The price action in stocks like Old Dominion Freight Line Inc. (NASDAQ: ODFL) and XPO Inc. (NYSE: XPO), a respective 11.8% and 26.8% over the past month alone, signal that domestic business activity could be the common view for the economy in the coming quarters.

Investors can understand it by recognizing that, as domestic production becomes the solution to tariffs, transporting finished products and raw materials will translate into more earnings per share (EPS) growth ahead.