Former Trump chief economist Larry Kudlow on Friday said the U.S. will likely see another high inflation reading in May based on a slumping report on retail sales and a drop in consumer confidence.
"We had one in April. All the indexes were bad consumer prices, producer prices and import prices were up big - bigger than Wall Street thought by the way, and there's probably another month of that left," Kudlow said Sunday on the John Catsimatidis radio show, "The Cats Roundtable " on WABC 770 AM.
Notwithstanding, Kudlow said, “stocks had a great week and finished today with a powerful rally.”
Still, it is “the combination of profits plus free money from the Fed that is driving stocks," he said.
The “stock market is bullish and it's riding on a wave of profits and profits are the mother's milk of stocks, and they're doing their job,” he added. “It's going to go on for a while… but it was a good week for stocks - over 100 million Americans owned stocks directly or indirectly, and I'm glad they got wealthier.”
However, he warned, “there are threats out there, right? They’ve always stressed the stock market is always right, except when it changes its mind; and the threats are higher interest rates, higher inflation and higher taxes. I don't know when that kicks in, but those are threats that are out there.”
Kudlow is cautiously optimistic that President Joe Biden’s American Jobs Plan and similar legislation won’t pass.
The American Jobs Plan and the American Families Plan have a combined cost of more than $6 trillion.
“Maybe the legislation won't pass, he said, we'll be lucky. I'm kind of doubtful, so we'll see what happens," he said.
But as far as predicting the rate of inflation, Kudlow said, “I'm going to sit back and take a look at the dollar, and I'm going to see what the treasury break even bond spreads are telling me, but I think probably I won't agree… about 6% inflation in the fall, not yet.”
“If the dollar, if king dollar falls off its throne, that is surely going to be a sign of longer-term inflation, not just a month or two, but longer term. So, we'll see,” he added.
Part of The Biden Administration plan is to “end fossil fuels” in part by increasing electric car production.
However, the critical materials necessary for electric car battery production “are owned by China and second of all, they cost a fortune to produce, and third of all, they're bad for the environment because of the mining. And finally, you couldn't get enough to meet the higher demand to begin with. This, I mean, just getting from here, ending fossil fuels, and this is not what I want… you couldn't do it if you wanted to do it. I don't want to do it, but you couldn't afford to do it. It would utterly decimate every part of this economy. You couldn't do it. We don't have the resources,” Kudlow added.
“The vast majority of it's going to be built in China and the resources are going to come from China, but… we can't get hold of the critical minerals to do it. We just can't do it, the supply will never reach the demand, which it would take 100 years, he concluded.
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