Trumpian growth is the supply-side cure for “bidenflation“and that’s the thing about the riff. No one really knows what drives stocks up or down in the short term. That’s why I’ve long believed in a buy-and-hold index fund strategy, ie passive investment.

Many will disagree, and I respect that, but this is my opinion. That said, it’s worth noting that the Dow Jones has dropped 9 days in a row, the first time since 1978. More than half of the Dow’s decline is the function of a 20% drop in United Health Group, after of the atrocious murder of his Brian Thompson, CEO of insurance. But aside from the United Health tragedy, roughly two-thirds of the Dow’s components have fallen during this 9-day selloff, including NVIDIA, which is down 11%.

No one should hit the panic button on the stock market. The S&P 500 has been roughly flat during this period of the Dow selloff, but the fall in the Dow gives me an opportunity to raise a couple of economic policy questions, which may or may not have anything to do with the selloff.

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However… I think the Federal Reserve will make another mistake when they lower their target interest rate tomorrow, as expected, and I’m also concerned that the Trump administration and the Republican Congress will delay their tax cut plans.

Again, this may or may not have something to do with the Dow correction, but on the Fed side, an interesting story from Breitbart News speculates that some members of President Trump’s economic team are warning that the risks of inflation may be underestimated, Jay Powell should be careful. with these rate cuts and “Bidenflation” is not dead.

Essentially, the data shows that over the past 6 months or so, several measures of inflation have not only stopped falling, but have actually risen. CRB commodity prices have increased by 16% over the past year. Gold and silver prices have risen nearly 30% over the past year.

Money supply measures have been accelerating again over the past 3 months. Asset prices, especially stocks, have been booming at least until recently. There is a lot of liquidity floating around right now. Profits are the mother milk of stocks, at least to my way of thinking, and they’ve been solid, but the original trump The post-election rally was based on the hope that tax cuts and deregulation would further boost corporate profits.

That doesn’t mean Trump’s plan won’t be implemented, but there could be growing concern that it could come later in the year, and that could cloud the outlook for the economy and the stock market next year or even going into 2026. These are concerns. You can be sure that President Trump and his team do not want the Fed to deliver a higher inflation rate next year.

You can be equally sure that the new administration does not want a stalemate economy. So I have a supply-side cure: to remember the late Robert Mundell, who won a Nobel Prize in economics and was a dear friend and mentor.

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The cure for supply-side inflation is to lower marginal tax rates and minimize economic regulations on businesses, thereby creating new incentives for work effort, investment, and growth. In other words, produce more goods, and that alone would reduce inflation. Second, Mundell would argue for strengthening the real value of the dollar by printing fewer dollars. In today’s terms, that means the Fed would have to shrink its balance sheet from $7 trillion to $5 trillion.

The Mundell combination would generate more goods chasing less money. This is a cure for faster Trumpian growth and ending “bidenflation” once and for all. think about it This is the riff.

This article is adapted from Larry Kudlow’s opening commentary in the December 17, 2024 edition of “Kudlow.”