Economic guru Larry Kudlow advises savvy investors to remain calm and stay invested in the stock market, despite it hitting record highs seemingly on a daily basis.
“My one recommendation right now is to stay in stocks. Do not go to bonds. Bonds are overpriced,” the veteran financial guru and former Ronald Reagan adviser told ThinkAdvisor.com.
“If the economy does perk up, interest rates are going to go up, as they should. But stocks will also go up, though not in a straight line. There’s a big fat correction out there someplace,” said Kudlow, a Newsmax Finance Insider, radio talk-show host and CNBC senior contributor.
“People don’t want to pull the trigger for investments until they see a new tax law. If we don’t have one, we’ll continue to stagnate," said Kudlow, who served as the Trump campaign's senior economic adviser.
"Businesses have been making money, though they’ve pushed a lot of it offshore. Trump’s tax plan is aimed at resolving the problem of lack of business investment,” said Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
“If we don’t get the tax cuts, it won’t help. How much it will hurt, I don’t know as long as profits are doing well because that’s an important floor under stocks,” said the radio host of "The Larry Kudlow Show" and author of "JFK and the Reagan Revolution: A Secret History of American Prosperity," written with Brian Domitrovic and published by Portfolio.
“I think the biggest factor behind rising stocks has been a big pickup in profits since late last year. Profits are the mother’s milk of stocks. [Many] investors may not like Trump, but they would love to see corporate tax cuts. So I’m sure that’s absolutely part of the stock market rally,” Kudlow said.
But what about his own personal investing strategy?
“I’m a buy-and-hold guy. I like the indexes. I Like ETFs. I own SPDRs and have owned them for a long time. I’ve done very well. If you own the S&P 500, you’re buying the world stock market,” said Kudlow, who during the first term of the Reagan administration (1981–1985) was associate director for economics and planning in the Office of Management and Budget (OMB).
Kudlow doesn’t like active management.
“The numbers are queer. A lot of my friends are brilliant hedge fund managers. Some have done great. But when you look at the whole universe of hedgies, they’ve lagged the market pretty badly [and are] losing money with cash outflows. Financial advisors should be aware of that. Most are because that game is much different form the stockbroker game,” he said.
Meanwhile, Newsmax Finance Insider Hans Parisis explains that it is possible that trade may start to move to the top of President Donald Trump's agenda.
"President Donald Trump’s list of accomplishments in office is somewhat shorter than his list of tweets while in office. There is perhaps a desire on the part of the White House to take actions in areas that do not require Congressional approval," Parisis recently wrote in his exclusive Newsmax Finance commentary.
"Trade is one area in which the U.S. president has considerable power."
(Newsmax wires services contributed to this report).
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