Markets get a friend in Larry Kudlow who might buck Trump on two key issues

Key Points
  • President Donald Trump is expected to name Larry Kudlow, a CNBC contributor and host as well as a former Reagan administration official, to head the National Economic Council.
  • Kudlow is an ally of open markets, a supply-side free trader and passionate advocate for a strong currency.
  • Two areas where he could conflict with Trump as on tariffs and dollar strength.
Larry Kudlow announcement could come as soon as tomorrow
Larry Kudlow announcement could come as soon as tomorrow

With Larry Kudlow about to ascend to top economic advisor to President Donald Trump, investors get an ally of open markets, a supply-side free trader and passionate advocate for a strong currency.

As important, the impending appointment, which CNBC reported Wednesday afternoon, marks what should be a peaceful handoff of influence from Gary Cohn to another figure who can provide sound advice to the president.

"I would characterize it as a safe pick and a pick that many believe will be able to communicate in a way where his voice will be heard," said Michael Yoshikami, founder of Destination Wealth Management as well as a fellow CNBC contributor who frequently appeared on-air with Kudlow. "That's part of why he was selected. He knows media, he knows how to do this, and there's something to be said for someone who has some savvy in terms of media relationships."

Larry Kudlow is joining Trump’s team. Here's what you need to know
Larry Kudlow is joining Trump’s team. Here's what you need to know

Kudlow will arrive at the job after a TV career that began in 2001, preceded by a long run in business and a stint from 1981-85 in the Reagan administration, at the Office of Management and Budget.

On CNBC, he hosted or appeared on a number of shows, including "Kudlow & Cramer" and "The Kudlow Report." Through it all, his advocacy for open markets and his beloved "King Dollar" were consistent.

Larry Kudlow
Scott Mlyn | CNBC

As director of the National Economic Council, his advocacy of a strong currency and open trade could put him at odds with two core Trump principles. The president has openly endorsed a weak dollar and recently announced tariffs on imported steel and aluminum. Though Kudlow expressed concern with the tariffs, he did say they made sense as a negotiating wedge.

"I don't think he's going to come in and immediately start pounding the desk about a strong dollar," Yoshikami said. "That's a nuanced item that I don't think would get a lot of traction with the administration."

Kudlow's other sparring partners on air see him as being perceived positively in the markets.

"Larry is a world-class communicator and he's going to be able to deliver the Trump message probably more effectively than anybody," said Larry McDonald, founder of the Bear Traps Report investment letter and former Wall Street bond executive with Societe Generale and Lehman Brothers.

"The market will be fine with it," McDonald said of Kudlow's appointment. "The dollar thing is an issue for some people. I think the market's going to understand that Larry is more of an America-first guy than [Cohn]."

McDonald added that the tariff issue could become a concern if it escalates into a global trade war.

"The market's basically starting to freak out because it's contemplating a regime or an administration that is much more America-first," he said. "The globalists have been kind of pushed out. That's somewhat upsetting on the trade side. The market's probably going to overreact to that."

Even for those on the other side ideologically, Kudlow likely will come across as a figure who can be reasoned with and might talk Trump away from some of his more extreme positions.

"I've been arguing with him for 30 years intensively ... and we still really, really like each other. So that tells you something right there," said Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities and chief economist for former Vice President Joe Biden. "I think there's another grown-up in the room, and I'm glad to see it."