LARRY KUDLOW: Falling energy prices are the greatest story never told
It’s a new year and the stock markets are already hitting new record highs. Pretty soon you’re going to get 50,000 on the Dow and over 7,000 on the S&P 500. The lefty media never talks about this, but more or less 135 million American investors are surely talking about it. That includes all the lefty-leaning union pension funds. Stocks up, taxes down. Stocks up, federal regulations down. Stocks up, energy prices down.
Total it all up, a roughly 25% drop in oil prices, which permeates virtually the whole economy, and you’re bringing higher take-home pay to middle-class kitchen tables and higher profits to business all across the country.
Tax cuts are great for profits. Deregulation is great for profits. 700,000 new private jobs and a nearly 300,000 plunge in federal government jobs spells more profits. Profits build great companies. Profits mean more job opportunities. Profits mean higher wages. Profits are the mother’s milk of stocks. Think of it. It’s not the first time I’ve ever made this point. It’s kind of my thing.
Aspirin, ball point pens, cell phones, coffee makers, computer keyboards and monitors, dog collars, eyeglasses, fertilizers for food, golf bags and golf balls, and eye pads, and iPhones. And laptops. And luggage. Pajamas, and pharmaceuticals. And shaving cream, and shampoo, and skateboards, and tennis rackets. And hundreds of other items. The drop in oil prices and gasoline prices is right now the greatest story never told.
CPI reports in the months ahead could even come in negative. I’m not saying every month, but you may get some negative prints because of falling energy prices. October and November averages were one tenth of one percent. That’s all 0.10%. Way below the Fed’s target. That means wages have even more power when prices are actually falling. That means the whole economy’s real GDP could show a 5% print of 6% or 7%. Not every quarter or year, but the power of falling energy and falling inflation can drive the economy high.
Already there’s a business boom going on, plus tax refunds are on the way. Plus, Mr. Trump’s factories — he loves new factories — it’s a great way to avoid tariffs. And to create jobs, and build wages. And hold down prices. And build up stock market wealth. Falling energy prices are going to hand the midterms over to the GOP as long as they sell it. It's the greatest story never told.