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Wall Street will be looking for one thing from Trump's 'must-see' speech

When President Donald Trump delivers his address Tuesday to a joint session of Congress, one constituency will be paying closer attention than usual: Wall Street.

For Trump to score on the Street, the president will have to display one characteristic that hasn't been a particularly strong suit of his — focus.

That, along with at least some detail on how the 45th president plans to accelerate economic growth, could help assuage at least a few frayed nerves in the investment and business community.

"The market has embraced pro-growth, pro-business. At the very core of that embrace is tax reform, it is scaling back regulation," said Quincy Krosby, market strategist at Prudential Financial. "The market wants to make sure that that agenda is ... still a top priority."

To maintain confidence, Trump will need to avoid some of the haphazardness he has displayed during the early days of his presidency, according to views from a slew of Wall Street pros.

On any given day, Trump at one moment can be meeting with business leaders and making welcomed statements about expanding economic opportunities, then a few hours later causing tumult with a stray tweet or by tongue-lashing the media.

The speech, then, gives him a chance to deliver at least a broad outline to show that the economy remains his primary target.

"This particular speech has taken on a more prominent role for the market than it has in the past. It's important, but it's not where he's going to get into specifics," Krosby said. "This has become a must-see for the markets."

Pedestrians walk by the New York Stock Exchange in New York.
Getty Images
Pedestrians walk by the New York Stock Exchange in New York.

Obamacare comes first

If statements Monday are any guide, the speech may be a bit less policy-heavy than the market hopes. Trump cautioned governors assembled at the White House that fixing the Affordable Care Act — Obamacare — has higher White House priority than tax reform.

"Tax reform is going to be major, simple and wonderful, but we can't do it until we do health care," the president said.

That could be a problem, particularly considering the stock market's strong post-election rally has been predicated largely on an agenda of lower taxes and regulations along with increased domestic spending.

"The stock market may have to abandon its hope of dramatic stock-friendly policy change, threatening the post-election rally," said David Kelly, chief global strategist at JPMorgan Asset Management.

Trump's speech will come the same day the government delivers a revised reading on fourth-quarter growth. The initial reading showed GDP grew by 1.9 percent to end the year — another ho-hum showing the likes of which Trump said would end during his administration.

However, the details of how and when remain murky.

Treasury Secretary Steven Mnuchin told CNBC recently that investors need to be patient when it comes to the pace of economic policy changes. He expressed hope that tax reform would get done before the August congressional recess, but cautioned that the real effects from the White House's economic program wouldn't be felt for a year or more.

Trump's 'comfortable being combative'

A halting performance from Trump in front of Congress could compound market angst.

"For now the market wants to get a sense that he's on top of this and there is a plan going forward — once we do Obamacare and the spending stuff that we are going to do tax reform and on and on," said Greg Valliere, chief strategist at Horizon Investments. "I think he'll say the right things the market wants to hear."

Of course, Trump has to contend with more than the market — he also has a consensus to maintain in his own Republican Party, where there are stiff philosophical disagreements about what the White House should tackle first.

In fashioning his statement, Trump might simply choose to ignore them both and instead focus on his core, populist constituency.

That's a real possibility considering that senior policy advisor Stephen Miller will be writing the speech and could fashion it after the confrontational inaugural address that he also penned.

"Miller is more interested in the opinions of Trump's base than in those of the media and Congress, and he has been closely involved with several of Trump's most controversial policy moves, including the so-called 'Muslim ban' executive order," Beacon Research said in a note.

Trump is "more comfortable being combative," Valliere added. "He lives in an adoring echo chamber. I'm not sure he realizes how important this speech is for him to get things back on track."

The market will get to vote immediately on the speech, and it will come at a critical time.

Stocks and bonds have shown a noticeable divergence lately, with the former continuing to rally and the latter, through lower yields, indicating that the initial Trump growth expectations may not be realized, at least in the near term.

"There is a growing worry that (the Trump agenda) is running into resistance," Prudential's Krosby said. "Right now, the market has accepted the fact that it's going to take longer, that there's the typical horse trading you get around an agenda like this. It's not going to be smooth sailing and quickly implemented."

— CNBC's Stephanie Dhue contributed to this report.