In a quiet week for economic data, this week has already seen the stock market’s worst day of the year and Thursday could be the Trump administration’s worst as well.
On Thursday, the House of Representatives is set to vote on the American Health Care Act, the GOP-proposed replacement to Obamacare. As of Wednesday evening, 26 House Republicans had said they would vote “No”; only 21 Republicans can vote against the bill for it to pass.
A failure for House Republicans to get healthcare through is likely to set back the timeline on other major initiatives, notably tax reform.
In markets, we’ll get a speech from Federal Reserve Chair Janet Yellen in the morning, while economic data will include the weekly report on initial jobless claims.
Trump trade
There’s no doubt that the uptick we’ve seen in sentiment across the consumer and business sectors has been due to the election of Donald Trump as President.
The post-election market rally is also a clear sentiment indicator that things are pointing up.
But recently, questions have been raised over whether all of the gains we’re seeing in the stock market, and the growth many strategists are forecasting, is due to Trump or to an improving corporate and economic backdrop.
Thursday will likely prove instructive on this front.
Recall that on Tuesday, concerns over Trump’s economic agenda — namely a failure to pass the AHCA and a resulting delay in tax reform or infrastructure plans — were fingered as a reason for why stocks sold off so hard. Other strategists, however, looked at more technical factors as triggering the decline.
A report from Bloomberg on Wednesday said the reflation trade — higher stocks, higher bond yields, higher inflation — appears at risk of falling apart if the AHCA passage fails. This is because, again, the rest of the agenda out of the Trump administration faces an overall greater risk of failure.
But stock market reactions need not be symmetric, and just because markets rose in reaction to positive views of the Trump agenda after the election, a collapse in stock prices doesn’t necessarily follow a disappointment on the legislative front.
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Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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