Trumpian growth is the supply-side antidote to "Bidenflation" and that's the subject of the riff. No one really knows what drives stocks up – or down – in the short term. That's why I've long believed in the buy-and-hold index fund strategy, which is passive investing.

Many will disagree, and I respect that, but that's still my opinion. That being said, it is worth noting that the Dow Jones index has fallen 9 days in a row - for the first time since 1978. More than half of the Dow's decline was a function of the 20% decline in United Health Group, following the brutal killing of their insurance CEO Brian Thompson. But aside from the United Health tragedy, about two-thirds of the Dow's components have fallen during this 9-day selloff — including NVIDIA, which has fallen 11%.

No one should hit the panic button in the stock market. The S&P 500 was virtually unchanged during this period of the Dow selloff, but the decline in the Dow gave me an opportunity to raise some economic policy issues – which may or may not be related to the selloff.

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But still... I think the Federal Reserve will make another mistake - when they lower their target interest rate tomorrow, as widely expected, and I also worry that the Trump administration and the Republican Congress will delay its tax cut plans.

Again, this may or may not have anything to do with the Dow correction, but, regarding the Fed, an interesting Breitbart News story speculates that some on President Trump's economic team are warning that inflation risks may be underestimated, Jay Powell should be wary of cuts this rate and "Bidenflation" is not dead.

Basically, the data shows that over the last 6 months or so, various measures of inflation have not only stopped falling, but have actually risen. CRB commodity prices rose 16% over the past year. The price of gold and silver rose almost 30% over the past year.

The money supply has been accelerated again since the last 3 months. Asset prices, especially stocks, have been booming at least until recently. There is a lot of liquidity floating around right now. Profits are the mother's milk of stocks, at least in my way of thinking – and they are solid, but original Trump The post-election rally is based on the hope that tax cuts and deregulation will further boost business profits.

That's not to say Trump's plan won't be implemented, but there may be a lingering concern that it might happen later this year — and that could cloud the outlook for the economy and the stock market next year or even into 2026. That's a concern. You can be sure that President Trump and his team do not want the Fed to deliver higher inflation rates next year.

You can also be sure that the new administration does not want an unstable situation economy. So, I have an antidote on the supply side: harkening back to the late Robert Mundell, who won the Nobel Prize in economics, and was a dear friend and mentor.

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The supply-side cure for inflation is to lower marginal tax rates and minimize economic regulation of business, thereby creating new incentives for work, investment and growth. In other words, produce more goods, and that in itself will lower inflation. Second, Mundell would argue for strengthening the true value of the dollar by printing fewer dollars. In today's terms, this means the Fed should reduce its balance sheet from $7 trillion to $5 trillion.

Mundell's combination will generate more goods by chasing less money. That is the cure for faster Trumpian growth and ending "Bidenflation" once and for all. Think about it. That's the riff.

This article is adapted from Larry Kudlow's opening commentary in the December 17, 2024, edition of "Kudlow."