Kudlow’s Money Politics

Lay Off the Panic Button

Today’s ISM number was obviously not a good number. The stock market confirmed this.

Free market capitalism doesn’t mean we’re going to be recession-free. Maybe we are going to have a mild correction. Maybe not. But look, over the last twenty-five years, we’ve been in prosperity 95 percent of the time. We’ve only been in recession 5 percent of the time. So I’m still betting on and buying Goldilocks for the long run.

Let me add something here: unemployment claims are low; bank credit is still growing; and the most recent ISM for manufacturing was up. Incidentally, we’ve had false signals from the services index before. So I’m going to reserve final judgment. But no matter what the signal was today, I’m going to bet that the economy will be rebounding sometime this summer, if not sooner. We are in a slow patch. That’s all. It’s nothing to get up in arms about. Meanwhile, outside of financials, profits are up, not down. So let’s wait and see.

With low tax rates, low inflation outside of energy (and by the way, inflation’s going to fall like a stone in the next few months), a deregulated economy, a high-tech booming world economy, the landscape has changed enormously for the better.

The biggest positive change before our eyes in the last decade or so has been the fact that the world has been busy importing free market capitalism. Bigtime. This gives everything a much stronger economic base going forward. When you couple that with technology, you get a much stronger base still. So when we get these economic soft patches ‘” if that’s what this is going to be ‘” they’re just going to be as mild as the ones we experienced in 2001 and 1991. We got through them. We’ll get through this. There’s no need to press the panic button.

The upcoming presidential election is a pivotal issue in all this. The question for investors, for businesses, and therefore for all the hardworking Americans who work in all these businesses is this: Is Washington going to go on some sort of tax hiking binge? That bothers me. Investors need to watch out for this election story.

Larry Kudlow is the author of JFK and the Reagan Revolution: A Secret History of American Prosperity, written with Brian Domitrovic.

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