Economic guru Larry Kudlow contends that America is now the “best country” for business in wake of the sweeping tax cuts engineered by President Donald Trump.
He praised the United States’ economy following the tax cuts and proclaimed the country now the “best” for business.
“We are on the front end of an investment boom that’s largely tied to the tax cuts,” Kudlow told New York AM 970 radio’s John Catsimatidis on “The Cats Roundtable.
“[It] will be stronger than anything we’ve seen in probably 25 years,” the former Ronald Reagan adviser told Catsimatidis.
“America is once again becoming the best investment environment in the world — the best country in which to do business. And that’s a powerful positive,” said Kudlow, a Newsmax Finance Insider and CNBC senior contributor.
Kudlow, also a radio talk-show host, was frustrated that in reality, the recent volatile market plunges don't actually reflect the sturdy and healthy economy.
Many of the algorithmic changes that have occurred are driven by computers, not humans, said Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
Meanwhile, the boundaries on the CBOE Volatility Index (VIX), often referred to as the "fear index" were exceeded, said Kudlow, pushing the index up to almost 50 at one point, which triggered a lot of selling.
A higher Friday close for New York stocks following a week of “vol” induced selling, lifted markets in Asia and Europe, helping MSCI’s all-country index rise off four-month lows, while European shares firmed 1.4 percent after touching six-month troughs last week.
Wall Street’s equity volatility gauge, the VIX - the spike in which had kicked off the ructions - was at 26.5 percent, easing off Friday’s 29 percent close.
While the index had rocketed to 50 at the height of last week’s turmoil, current levels are well above the long-term average around 11 percent, in a sign that investors’ nerves are still jangling.
“It’s a free country, it’s a free market, but I think we go too far with electronic trading. It doesn’t reflect the fundamentals of the economy, which are very good,” said Kudlow, who served as the Trump campaign's senior economic adviser.
Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985, said he experienced similar market volatility in the '80s.
Kudlow urged investors to use any dips as a buying opportunity.
“The country is good, profits are good, the mother’s milk of stocks … This is not going to be a permanent crash. This is not 2008. People should not panic. In fact, stocks are going to be cheaper. I’d buy them and I’d hold them for the long run,” said Kudlow, author of "JFK and the Reagan Revolution: A Secret History of American Prosperity," written with Brian Domitrovic and published by Portfolio.
Meanwhile, Wall Street’s main indexes rose for a second straight session on Monday, led by gains in technology and financial stocks, after its worst week in two years as the specter of rising inflation led to fears of accelerated interest rate hikes.
Despite gains of about 1.5 percent on Friday, the three indexes are still 6 percent to 6.5 percent lower since Feb. 2, when strong U.S. jobs and wages growth data sparked inflation fears, igniting a rally in bond yields and a sell-off in stocks, Reuters explained.
“There are some open doors left, notably, where interest rates are and where they are heading. So while there has been some relief in some assets we don’t think the ”all clear“ has been sounded just yet,” said Eric Freedman, chief investment officer for U.S. Bank Wealth Management.
Equities for years have looked relatively attractive compared to the low yields offered by bonds, but the rise in Treasury yields has diminished the allure of stocks, especially with stock valuations at historically expensive levels.
That, along with a reversal of bets on low volatility drew the three major U.S. indexes to correction territory last week.
Wall Street’s fear gauge, VIX, short for the CBOE Volatility index was last at 27.94 on Monday, more than double its 50-day moving average but trading in a narrow 2-point range.
President Donald Trump unveiled a long-awaited infrastructure plan that asks the U.S. Congress to authorize $200 billion over 10 years to stimulate $1.5 trillion in improvements paid for by states, localities and private investors.
While the proposal will recommend cuts that would lower the deficit by $3 trillion over 10 years, it is likely to stoke a debate on spending that began when Congress passed a tax overhaul in December.
“The concern is if there is going to be a much higher deficit, a lot more borrowing that’s going to go on. That’s why I think the bond market is setting the tune more so than the stock market,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
(Newsmax wire services contributed to this report).
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