Despite a Temporary Oil Shock, the Postwar American Economy Will Flourish

It may not be great, but the American economy is expanding even with war-related energy prices spiking. And a certain amount of anxiety in the air. I don’t deny it.Yet today’s S&P Global composite remained in growth territory, higher than 50 on the index, and manufacturing actually went up along with new orders.Input prices did go up too, as the temporary effects of oil priced at almost $100 a barrel are being felt even if it’s only for a short duration.I’ll repeat my minority view that we’ll not get a big permanent inflation jump simply because the money supply, known by economists as M2, which is the ultimate inflationary cause, is growing only around 3.5 percent, well below its historical trend.During President Biden’s tenure that measure jumped to nearly 30 percent, and that’s why cumulative Bidenflation was higher than 20 percent.Unless this war lasts another year, it is still highly unlikely that we’ll get a big inflation shock. Now the stock market’s only off a few percentage points, and profits remain very strong.So, at the risk of being wrong, I still believe investors should be staying out of oil, and going into stocks.Buy the index and hold it for 100 years. Maybe 200 years.Meanwhile, productivity continues to surge, trending around 2.5 percent — that’s a big number.We’re in the throes of an AI quantum computing, high-tech revolution, which is going to drive our economy for many many years.Labor markets may not be booming, but they don’t have to, with record self-deportations, and criminal deportations, and a border that’s closed to illegal immigrants. Weekly unemployment claims, meanwhile, are at rock bottom. The unemployment rate is at 4.4 percent.Business is in a capital investment boom, factory construction is roaring ahead, wages are still running ahead of prices, and consumers are still spending.Indeed, consumer tax rebates and tax cuts in the first quarter appear to be offsetting the temporary tax hike effect of war-related gasoline spikes. I get that.The Atlanta Fed’s GDPNow is tracking at about 2 percent growth in the first quarter. It may not be fabulous, but it’s not bad considering energy prices and the war.President Trump’s One, Big, Beautiful Bill of tax cuts, deregulations, and “drill, baby, drill” is still going to provide big tailwinds in the post-war period.Mr. Trump’s mission to destroy the radical Islamic extremist regime in Iran is changing the course of history and is bringing new freedom and prosperity to the Middle East and the entire civilized world.As always, America will lead the way.From Mr. Kudlow’s broadcast on Fox Business Network.

Despite a Temporary Oil Shock, the Postwar American Economy Will Flourish

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