A Geithner Put? – Kudlow Spins the Rally
Whenever the stock market falls, CNBCâ€™s Larry Kudlow reliably blames the Obama administrationâ€™s allegedly anti-business policies. But when the marketÂ was risingÂ on Obamaâ€™s watch, Kudlow generally did not talk about it.
On tonightâ€™s show, he took a different tack. He repeatedly asserted that the market has recently rallied not only on strong corporate profits, but also because Tim Geithner announced (on The Kudlow Report no less) that the Obama administration wants to cap US dividend and capital gains tax rates at 20%.
Kudlowâ€™s thesis is that American shareholders were selling, or going to sell, stock this year to realize capital gains before higher tax rates kick in next year. By mitigating this tax incentive to sell, Geithnerâ€™s announcement supposedly bolstered the stock market.
There isÂ a small problem with Kudlowâ€™s thesis: half of the recent rally occurred before Geithnerâ€™s announcement. The S&P 500 bottomed at 1,023 on July 2. In just two trading days after the US holiday weekend, it gained 37 points to close at 1,060 on July 7.
Geithner appeared on The Kudlow Report on the evening of July 7. Over the four trading days since then, the S&P gained a further 35 points to close at 1,095 today.
If anything, the rally decelerated after Geithnerâ€™s announcement. And almost half of the gains since then occurred today, in response to yesterday eveningâ€™s strong earnings reports.
I am not suggesting that Geithner actually slowed the market. But it is ridiculous to claim that his promise of continued light taxation for stock incomeÂ drove the rally.
CNBCâ€™s evening stock-market commentary should be left to Jim Cramer. That would help Kudlow stay focussed on attacking Obama and advocating tax breaks for the rich, untethered by potentially inconvenient data.