Killing Obamacare was a lot harder than expected, and it could be the biggest test yet for the 4-month-old Trump rally.
Stocks are in a holding pattern, waiting to see if President Donald Trump and the Republican House can work out their differences on a health-care replacement bill and put the president's pro-growth agenda back on track.
"It certainly is the biggest test of the Trump rally outside of how he's going to deal with geopolitical issues," said Art Hogan, chief market strategist at Wunderlich Securities. "This has indications for the timing of policy implementation. It's not just pushing it out, but it's the loss of the leverage he has when he gets to tax reform. The harder this is, the harder tax reform is."
The congressional wrangling over health care this week has served as a first warning that Trump's policy promises alone may not be enough to sustain the bull market, and that the president may not have as easy a time getting the Republican Congress to line up behind him as some investors thought.
"The way I view it is if you're on the Trump train, you're kind of stuck in between stations right now. The idea is he could very well get the votes needed, and that would clear the way for health-care reform and then, tax reform comes next. The probability of that happening seem to be lower than they were just a few days ago," said Michael Arone, chief investment strategist of the U.S. SPDR business at State Street Global Advisors.
The sparring over health-care replacement pits the conservative Freedom Caucus against House Speaker Paul Ryan and other Republican members. The White House continued lobbying efforts Wednesday. President Trump met Tuesday with GOP House members and urged them to approve the new bill while warning them they could lose their congressional seats if they do not get behind the repeal of Obamacare.
"I think it shows he doesn't have a magic wand to get his policy agenda passed at least in a rapid fashion. We'll get some change, but it's not going to be as promised and as quick," said Hogan.