Sunset convoy through the Strait of Hormuz, tanker escorted by warships.
Larry Kudlow, in a recent commentary, points to encouraging economic signals stemming from both President Trump’s focus on market performance and Federal Reserve official Kevin Warsh’s recent statements. Kudlow observes that President Trump views the stock market as a crucial barometer of the economy, a perspective he has held since his first term, even adjusting policies in response to market fluctuations.
Trump’s concern about avoiding an economic catastrophe, particularly in relation to potential conflict in Iran and the Strait of Hormuz, is underscored by his positive correlation between peace talks and stock market surges. Kudlow quotes Trump expressing a desire not to be remembered as Herbert Hoover, emphasizing that a strong stock market and job growth, coupled with falling prices, indicate a robust and respected nation.
The commentary also highlights the insights of Fed Chairman Kevin Warsh, who, according to Kudlow, articulated that strong economic growth, low inflation, and low unemployment can coexist. Warsh suggests that outdated economic models may not be suitable for today’s high-tech economy, offering a fresh perspective on monetary policy. This aligns with reports of increased oil flow through the Strait of Hormuz, with West Texas intermediate oil prices remaining stable compared to a year ago, while gasoline prices have seen a notable decrease.
Kudlow notes Warsh’s inclination towards restoring price stability and correcting the Federal Reserve’s failure to meet its 2 percent inflation target. However, he doubts a rate hike, suggesting that policy should be based on forward-looking data rather than past trends, such as the earlier spike in oil prices. Warsh’s focus on commodity markets, which are generally falling, and his emphasis on market reactions to actual data, signal a potential shift away from forward guidance.
The article concludes by linking Trump’s actions in diminishing Iran’s military capabilities to potential diplomatic successes, including the reopening of the Strait of Hormuz. Kudlow suggests this scenario provides Warsh with the opportunity to foster further positive economic news, characterized by both falling inflation and rising prosperity.
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