Kudlow’s Money Politics

Stocks and the BP Catastrophe

It is noteworthy that the BP oil explosion occurred on April 20. Three days later, on April 23, the market peaked. Is this is a coincidence? Or is Mr. Market telling us something that we do not yet fathom?

Surely the environmental impact of the spill will be gigantic, and it will continue for a very long time. But are we underrating the economy-dampening effects of the spill? The unemployment impact? The psychological impact? What’s the Gulf Coast damage really going to mean for stocks and the economy?

Amidst all the news of the horrible BP-Obama oil-spill catastrophe, we had a near-catastrophic May in the stock market. The major indexes fell 8 percent, across-the-board, in response to the Greek-European debt mess and fears of a second-half economic slowdown at home. To put this into some perspective, the Dow Jones Industrial Average suffered its worst May in 70 years.

The outlook for stocks is rather murky right now. On one hand, after-tax profits — the mother’s milk of stocks and the economy — look great, with a 43 percent year-on-year increase. And the Federal Reserve’s zero-interest-rate policy is still in place, along with a steep Treasury yield curve. That said, U.S. jobless claims and a handful of other indicators are looking soft.

Perhaps the best news is King Dollar. The greenback rose another 1.5 percent last week, and is now up over 20 percent. That’s helping to keep oil and gas pump prices well below their peaks (although both rebounded a bit recently). All in all, it’s a mild tax cut for the U.S. economy.

But to be honest with you, the outlook for the euro currency is for further declines. The debt crisis in southern Europe is very far from being resolved. Without interbank loan guarantees, another short-term funding crisis could reemerge as the euro sinks.

Gold did rebound 3 percent to close the week at $1,214. All investors should own some gold in their portfolios. But regarding the stock market, for what it’s worth, my view is that this correction may not be over yet. To make matters worse, we’re facing a host of Washington tax hikes next year, on top of our continuing deficit-spending problems.

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

Most Popular

Media

How American Journalism Died

In 2017, the liberal Shorenstein Center on Media, Politics, and Public Policy at Harvard University found that 93 percent of CNN’s coverage of the Trump administration was negative. The center found similarly negative Trump coverage at other major news outlets. The election year 2020 has only accelerated ... Read More
Media

How American Journalism Died

In 2017, the liberal Shorenstein Center on Media, Politics, and Public Policy at Harvard University found that 93 percent of CNN’s coverage of the Trump administration was negative. The center found similarly negative Trump coverage at other major news outlets. The election year 2020 has only accelerated ... Read More

The Last Days of Robin Williams

After Robin Williams hanged himself in 2014, the media speculated that financial troubles or depression related to drug or alcohol use might have been the cause. Without discussing those topics, Williams’s widow, Susan Schneider Williams, is eager to set the record straight and does so in Robin’s Wish, a ... Read More

The Last Days of Robin Williams

After Robin Williams hanged himself in 2014, the media speculated that financial troubles or depression related to drug or alcohol use might have been the cause. Without discussing those topics, Williams’s widow, Susan Schneider Williams, is eager to set the record straight and does so in Robin’s Wish, a ... Read More

In Praise of Trade School

About a decade ago, I participated in a discussion hosted by the chamber of commerce in a university town about state policies regarding higher education. I’ll never forget the first comment I got from one of the attendees. “The problem with your presentation,” she said, “is that it didn’t focus ... Read More

In Praise of Trade School

About a decade ago, I participated in a discussion hosted by the chamber of commerce in a university town about state policies regarding higher education. I’ll never forget the first comment I got from one of the attendees. “The problem with your presentation,” she said, “is that it didn’t focus ... Read More
World

Why Trump’s Mideast Peace Deals Matter

After Israel’s resounding victory over the Egyptian, Jordanian, and Syrian armies in 1967, the Jewish state again offered the Arab world peace in exchange for recognition. And it was again rebuffed. Instead, the Arab League convened in Khartoum to formulate a consensus response that became known as “The 3 ... Read More
World

Why Trump’s Mideast Peace Deals Matter

After Israel’s resounding victory over the Egyptian, Jordanian, and Syrian armies in 1967, the Jewish state again offered the Arab world peace in exchange for recognition. And it was again rebuffed. Instead, the Arab League convened in Khartoum to formulate a consensus response that became known as “The 3 ... Read More
Elections

Is the Biden Campaign Struggling?

On the menu today: a long, long list of Democrats warning that the Biden campaign may not be as strong as it looks in key states and among key demographics; another former White House staffer comes out and denounces the president, offering a hard lesson about how personnel is policy; and a long look at the ... Read More
Elections

Is the Biden Campaign Struggling?

On the menu today: a long, long list of Democrats warning that the Biden campaign may not be as strong as it looks in key states and among key demographics; another former White House staffer comes out and denounces the president, offering a hard lesson about how personnel is policy; and a long look at the ... Read More

Battleground Arizona

At an August 11 Trump-campaign event in Mesa, Ariz., the state’s Republican governor, Doug Ducey, noted in his remarks introducing Mike Pence that President Trump and the vice president “have visited the state of Arizona more than any other presidential administration in the history of our country,” adding: ... Read More

Battleground Arizona

At an August 11 Trump-campaign event in Mesa, Ariz., the state’s Republican governor, Doug Ducey, noted in his remarks introducing Mike Pence that President Trump and the vice president “have visited the state of Arizona more than any other presidential administration in the history of our country,” adding: ... Read More