Markets applaud Trump's policy mandate for change and that's the subject of the riff. President Trump's landslide victory – winning both the popular and electoral college votes – represents a significant mandate for change. Yes, it's a mandate to change the Biden-Harris administration because nobody wanted a second term, but it's also a mandate to change policies almost across the board.
One of those key policy changes is clearly on the economy. Now, I keep reading in various media outlets that Mr. Trump's policies are going to cause higher inflation and do great damage to the economy. So, it is worth noting that one of the best barometers of economic confidence in the future economy is the forward-looking stock market.
The day after the election, on Wednesday, November 6, the stock market registered its largest rally in history. Mr. Trump is an avid follower of the stock market, as I can attest during his first term – when almost any time I went into the Oval Office, no matter what the agenda, his first question to me would be the stock market.
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Stocks can change their minds, but Mr. Trump is well aware that they are a predictor of the future economy – and send thumbs up or thumbs down regarding economic policy. All these Nobel Prize winning economists keep telling people how bad Trump's agenda is, but the stock market begs to differ. Tax cuts, deregulation, and energy dominance – three key pillars of Mr. Trump's economic plan – are very bullish for future economic growth and profits. Hence, stocks keep rallying.
From the Tuesday election opening until the close of business today, more or less, the DOW is up well over 2,000 points. Also, interestingly, gold prices have fallen more than $100 – which is a vote of confidence in the Trump dollar. On many occasions during the campaign, the president-elect has talked about keeping the dollar as the world reserve currency and generating new economic incentives for private investment and economic growth, which would certainly add to the Trump dollar's attractiveness.
Just yesterday, Mr. Trump appointed former acting ICE Director Tom Homan as the new "border czar," and he promptly told interviewers that his top priorities were to identify and deport terrorists and public safety threats. Enhanced public safety really acts like a tax cut on the economy, reducing crime in cities and their businesses, families, and schools and Mr. Trump intends to act swiftly on that front.
Then, there's the overrated question of tariffs being inflationary. Mr. Trump slammed over $300 billion in tariffs on China in his first term, but there was no inflation. Joe Biden kept the tariffs in place during his term, but there was mammoth inflation.
Mr. Trump is adept at using tariffs as a negotiating tool – both for trade and non-trade issues, and he may oversee tariff reductions with some countries, as well as tariff increases with others. One place he will probably use tariff negotiation for a non-trade issue is Mexico. Look for President Trump to restore his "Remain in Mexico" policy, and he has already suggested to the new Mexican President Sheinbaum that if she doesn't cooperate with a new "Remain in Mexico," then he will slap at least a 25% tariff on all their exports.
Stopping the flow of illegal immigrants is not only a law and order and crime issue, it's an economic cost issue. Studies have shown that the majority of illegals do not work, but do rely on the public fisc for food, housing, healthcare and other welfare services. It is already costing us a fortune. Stopping it will save a fortune.
Finally, going back to the mandate for change on tax cuts and fiscal policy – lower marginal tax rates will pay for themselves, as the Laffer curve teaches and history proves. More rapid economic growth, greatly reduced tax avoidance and repatriation of overseas cash will all raise revenues.
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The other part of the deficit reduction could well come from the Elon Musk government efficiency discussions, where the brilliant inventor is talking about $2 trillion in lower spending, along with creative ways to turn federal asset holdings into revenue-creating enterprises.
Nobody talks about this stuff. They should. The voters want a mandate for change. Mr. Trump is going to give it to them. Forward-looking financial markets are clearly telling us Trump is on the right track. All these nitpicking media liberals should quit their belly aching and at least give the new president-elect a fair-minded chance to succeed. That's the riff.
This article is adapted from Larry Kudlow’s opening commentary on the Nov. 11, 2024, edition of "Kudlow."