Not even a week after the Trump administration and Congress rekindled optimism that they could soon make progress on a pro-growth agenda including tax cuts, the unexpected firing of the head of the FBI late Tuesday presented investors with a fresh reason to second-guess their confidence in the "Trump trade."
At the least, financial market participants viewed President Donald Trump's abrupt dismissal of FBI Director James Comey as an unwelcome distraction, while some fretted it could tie Washington in knots for months, potentially postponing already-delayed reforms.
Jack Ablin, Chief Investment Officer at BMO Private Bank, said, "on a medium-term basis, it does undermine the administration's power to get things done."
Nagging concerns about Trump's ability to get things done, along with some anxiety about stretched equity valuations, have combined to cap the rally, and stocks have done little since early March.
The administration recovered some credibility last week when the House of Representatives voted to repeal major portions of former President Barack Obama's Affordable Care Act after failing to do so a month earlier. The simple achievement of advancing the healthcare bill to the Senate had been seen by investors as a signal that enacting tax cuts was doable, the big question was just how soon - this year or next.
Should the Comey episode weaken Trump's bargaining ability with lawmakers, it may actually act as a catalyst for a tax bill, just one that might resemble congressional Republicans' version more than Trump's.
"An ongoing special investigation or shift in the balance of power could actually make Trump more eager to sign off" on the previously existing congressional tax plan, analysts at NatWest Markets said.
Reference: Reuters
Read more: http://www.reuters.com/
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