Delay seen, again, on
Trump growth agenda after Comey sacking
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[May 11, 2017]
By Dan Burns and Megan Davies
NEW YORK (Reuters) - 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.
The takeaway for the stock markets: donít bet on any quick legislation
around trade, the budget, healthcare or infrastructure.
"There is nothing good out of this for markets," said Michael Purves,
chief global strategist at Weeden & Co. "It will weigh on Trump's
ability to cut deals with Congress. It costs him negotiating leverage."
Jack Ablin, Chief Investment Officer at BMO Private Bank, said, "on a
medium-term basis, it does undermine the administration's power to get
Trump's election last November unleashed a powerful upswing in U.S.
stock markets on the premise that he would cut taxes and regulation and
usher through a major infrastructure spending package. The benchmark S&P
500 <.SPX> has gained 12 percent since Election Day, while shares of
tech stocks and smaller companies have performed even better.
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.
Around midday Wednesday, the S&P was near unchanged, as were other
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.
"There's a tremendous amount of hope baked into the market that Trump is
going to be able to act, particularly on tax reform," said Brad
McMillan, Chief Investment Officer for Commonwealth Financial in
[to top of second column]
U.S. President Donald Trump speaks to reporters after his meeting
with Russian Foreign Minister Sergey Lavrov at the White House in
Washington, U.S., May 10, 2017. REUTERS/Kevin Lamarque
Edward Perkin, Chief Equity Investment Officer at Eaton Vance, said if
the date to pass tax "is pushed out it's not so much a problem, but if
people question if it will ever happen, then that's a problem."
The degree to which this further alienates Democrats on Capitol Hill,
especially in the Senate, was another concern given how narrow support
has been so far for Trump's agenda.
Sen. Dianne Feinstein, a senior Democratic lawmaker from California, was
not optimistic that tensions between the parties would ease anytime
"I had been hopeful that we could have a line of activity that's going
to bring a very divided country together," Feinstein told Reuters
Wednesday. "The problem out there is that people are so divided."
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
"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.
Of course, some had already adopted the view that Trump's promised
reforms were a distant hope, at best.
"Investors are realizing that the fiscal policy agenda is being pushed
out farther on the horizon," Michael Arone, Chief Investment Strategist
at State Street Global Advisors.
(Additional reporting by Trevor Hunnicutt, Richard Cowan, Sinead Carew,
Rodrigo Campos; Editing by Nick Zieminski)
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