“Laws are like sausages, it’s better not to see them being made,” as the oft misattributed maxim goes. While this is a blow to the Trump administration and the Republican controlled Congress, it’s probably not as bad as the 24/7 sensationalized news media wants to make it. It’s definitely a set back and it did turn the market down when it was announced that after consulting with the President, Speaker Ryan was pulling the bill as it did not have the votes to pass.
Hey, law making is a messy business, deal with it. They will just have to go back to the drawing board or caucus and try again or not. And in the meantime move on to the rest of the agenda. As we stated in our 2017 Annual Forecast, “We give base case a 65% chance as he does not appear to have enough congressional support to slam through all that he campaigned on, further rationale for more compromise and less actually delivered.”
Meanwhile, the end of March has a history of volatility and end-of-Q1 market weakness. This recent selloff has come a bit early and is steeper than average, but not catastrophic. As you can see in the chart below of the 21-year typical seasonal pattern 2017 was tracking quite closely until the infamous Ides of March when the health care bill ran into stiff opposition.
Smartest thing Trump, Ryan and the republicans can do right now is shelve this health care business and move on to the other policy items that have a better chance of making a difference and getting more support like infrastructure spending. Get that through and implemented and then go back to the harder sells.
In any event this sets up another leg up during the final month of our Best Six Months. From the March 1 high the S&P 500 is down a whopping 2.2% at today’s close. Let’s not lose our heads and start calling for a market crash. We will stick to the drill and wait for our indicators to tell us when to go on the defensive.
On an encouraging note our good friend and crack market timer Dan Turov notified subscribers today that his, “Intermediate Term Model has upticked from bearish to bullish. This does not mean the bull market is without risk. It does mean that the odds favor the next 50 point move in the SPX is more likely to be up to about 2400 than down to 2300.” Dan’s Turov On Timing service is invaluable to us and we recommend you check it out.