Investors get to keep more of their paychecks because of the GOP tax overhaul, and some of that money over time should find its way into the stock market, a top economic advisor to President Donald Trump told CNBC on Tuesday as the meltdown on Wall Street entered its third session.
Kevin Hassett, chairman of the Council of Economic Advisers, said on "Squawk Box" that he expects the new tax law, championed by Trump and Republican leaders on Capitol Hill, to foster a more attractive environment for investors in the long term.
Acknowledging the past few days as ugly, he said, "Getting inside the mind of the market is difficult. [But] the economic fundamentals are really strong."
Many analysts ironically blame the expected economic bump from tax reform for starting the downturn Friday. That's because strong wage numbers in the January employment report sparked concern that too much growth might finally lead to higher inflation, which could push the Federal Reserve to accelerate its path for raising interest rates.
The positive economic growth from tax reform and deregulation will "not put upward pressure on prices," said Hassett, meaning he does not believe the economy will overheat and fuel the kind of inflation that would worry the Fed. The White House, according to Hassett, still believes the December projection from the Fed of three rate hikes in 2018 after three others last year is on track.
Even before Monday afternoon's 1,600-point plunge in the Dow Jones industrial average, the White House had expressed concern on the second day of the sharp the sell-off. "We're always concerned when the market loses any value, but we're also confident in the economy's fundamentals," an official said in a statement to CNBC.
The late gyrations in Monday's session saw the Dow all over the map before closing down by about 1,175 points.
Dow futures Tuesday morning were indicating another ugly open, which could officially put the average in correction territory, defined as a decline of 10 percent over time from recent new highs. About a week and a half ago, the Dow had closed at an all-time high.
Hassett told CNBC the White House is in constant contact with regulators to make sure the stock market is working the way it's supposed to — so sellers and buyers are able make transactions.
Before the stumbles, 2018 had gotten off to a strong start in what was a continuation of the post-November 2016 surge, a rally Trump has repeatedly used as a yardstick of success for his administration. Many analysts on the way up had warned the president that taking credit is a slippery slope when markets turn lower.