Economic guru Larry Kudlow advises savvy investors to brace for a slight dip in the seemingly endless bull market and resist the natural instinct to panic and pull out of stocks.
“Profits are the mother’s milk of stocks and the lifeblood of the economy,” the CNBC senior contributor recently told "Big John & Ramblin' Ray" on WLS (890AM) in Chicago.
“As long as profits are good, as long as you see business investment good, you want to ignore corrections,” the veteran financial guru and former Ronald Reagan adviser said, adding that President Donald Trump now has the country headed in the fast lane to growth and prosperity.
A "correction" is commonly defined as a temporary drop of at least 10 percent adjust for an overvaluation. Kudlow explained that the corrections he had in mind may fall between three and five percent, but even seven percent wouldn’t be out of the question.
“You want to ignore the geniuses that are going to tell you exactly when to sell and exactly when to buy,” the Newsmax Finance Insider explained.
“Let this thing run its course, it may run its course for several years,” he said. “You’re not going to get 300 points every day,” said Kudlow, author of "JFK and the Reagan Revolution: A Secret History of American Prosperity,"written with Brian Domitrovic and published by Portfolio.
“Corrections will come and go because the economy is picking up speed,” said Kudlow, who served as the Trump campaign's senior economic adviser.
"You have to look at overall picture. Is the economy getting? Most importantly, are profits getting better or worse?” asked Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
Friday on Wall Street, the S&P 500 and the Nasdaq edged higher on Friday following positive brokerage recommendations on a bunch of consumer names, but the Dow was reined in by losses in IBM.
“We’ve seen estimates being raised for 2018, so that provides some fundamental underpinnings for the strength we’ve in equity markets,” said Bill Northey, senior vice president of U.S. Bank Wealth Management in Helena, Montana.
However, a “disappointing” full-year profit forecast from IBM pushed its shares down 4 percent, on track for their biggest single-day loss since July 2017.
The U.S. Senate raced to avert a government shutdown ahead of a midnight deadline with no agreement on funding in sight. Although the House of Representatives voted on Thursday to extend the funding through Feb. 16, the bill appeared to be on the verge of collapse in the Senate.
“The market appears to be looking through this as a non-essential event, although we’re seeing a little bit of a pickup in volatility in the last couple of days,” Northey told Reuters.
For his part, Trump says the mainstream liberal media twists the facts and distorts reality.
"Do you notice the Fake News Mainstream Media never likes covering the great and record setting economic news, but rather talks about anything negative or that can be turned into the negative. The Russian Collusion Hoax is dead, except as it pertains to the Dems. Public gets it!" the president recently tweeted.
(Newsmax wire services contributed to this report).
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