Trump Tantrum looms on Wall Street if healthcare effort stalls | Reuters
By Megan Davies and Rodrigo Campos | NEW YORK NEW YORK The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration's healthcare bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth.
By Megan Davies and Rodrigo Campos
| NEW YORK
NEW YORK The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration's healthcare bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth. Investors are dialing back hopes that U.S. President Donald Trump will swiftly enact his agenda, with a Thursday vote on a healthcare bill a litmus test which could give stock investors another reason to sell."If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades," said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital.U.S. stocks rallied after the November presidential election, with the S&P 500 posting a string of record highs up to earlier this month, on bets that the pro-growth Trump agenda would be quickly pushed by a Republican Party with majorities in both chambers of Congress.The S&P 500 ended slightly higher on Wednesday, the day before a floor vote on Trump's healthcare proposal scheduled in the House of Representatives. On Tuesday, stocks had the biggest one-day drop since before Trump won the election, on concerns about opposition to the bill.Investors extrapolated that a stalling bill could mean uphill battles for other Trump proposals. Trump and Republican congressional leaders appeared to be losing the battle to get enough support to pass it.
Any hint of further trouble for Trump's agenda, especially his proposed tax cut, could precipitate a stock market correction, said Byron Wien, veteran investor and vice chairman of Blackstone Advisory Partners. “The fact that they are having trouble with (healthcare repeal) casts a shadow over the tax cut and the tax cut was supposed to be the principal fiscal stimulus for the improvement in real GDP," Wien said. "Without that improvement in GDP, earnings aren’t going to be there and the market is vulnerable."Strategists have been cautioning for weeks that markets are pricing in a scenario where nothing goes wrong with Trump's agenda. Investors are paying $18.10 for every dollar in earnings expected on the S&P 500 over the next 12 months, near the most expensive U.S. stocks have been since 2004.
"This is really about the fact that the market is pricing in too much certainty on a number of accounts," said Julian Emanuel, executive director of U.S. equity and derivatives strategy at UBS Securities. "Even if you got the positive vote, there's still the residual knowledge that the agenda will be difficult to get through the Senate."While investors and strategists have said they do not see an immediate threat to the eight-year-old bull market, there is a risk of a 5-to-10 percent drop. Only a bear market -a 20 percent decline- would put an end to the bull."It looked like a mini tantrum," said David Kotok, chief investment officer of Cumberland Advisors. "Trump has made the House vote his own now so he has a lot at stake. My guess it will pass the House. If not, markets will be shocked and it won't be pleasant."Michael Arone, chief investment strategist at the US SPDR Business at State Street Global Advisors in New York said that it the healthcare bill fails, "a correction of 5 percent is not unreasonable given how far we’ve come in such a short period of time."
FOCUS ON LEGISLATION
Investors are now more focused on the actual mechanics of the legislative process, said Brian Daingerfield, Macro Strategist at NatWest Markets."I noticed this was the first day (on Tuesday) I was getting inquiries about the healthcare law and the vote count," Daingerfield said. Wall Street views the healthcare vote "as a test of Trump's ability to unify the party," he said. "It has a symbolic significance." After the healthcare bill, the market will look for movement on tax and infrastructure. The president has said he wants the health bill passed by the mid-April Easter holiday and a schedule from the administration aims for tax reform being passed by August. Only then will they begin to tackle infrastructure spending."U.S. equities have been priced for perfection since the start of 2017 and (Tuesday) was a rude reminder that the legislative process is imperfect on even its best days," said in a research note Nicholas Colas, chief market strategist at Convergex, a global brokerage company based in New York. (Additional reporting by Jennifer Ablan, Chuck Mikolajczak, Caroline Valetkevitch, Sinead Carew, Richard Leong, Lewis Krauskopf, Saqib Ahmed; Editing by David Gregorio)
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By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.