The departure of controversial White House advisor Steve Bannon gives the White House the opportunity to refocus, which should be a slight positive for markets, but it will be up to President Donald Trump to convince investors that he can put his agenda back on track.
Bannon's absence from the West Wing could hand a louder microphone to some of the aides who are more respected on Wall Street, such as Trump's top economic advisor, Gary Cohn, seen as a voice of reason and champion for the administration's economic programs.
As chief strategist, Bannon was seen as a divisive force, pushing nationalist views and protectionist policies, like a trade war with China. Often cited as a party to the infighting among White House advisors, Bannon was also someone sometimes seen as having great influence over the president.
"It's a good thing if it turns out to strengthen Cohn's hand," said Marc Chandler, chief currency strategist at Brown Brothers Harriman. Chandler said the Republican party is a coalition of many groups, including business, and business was beginning to desert Trump.
"Within the government, Cohn is the voice of that [business] faction of the coalition. If Bannon's departure is a victory for the Cohn wing, that's one thing. It's going to take time to tell. Trump has just been going off the reservation, and that's not Bannon," Chandler said.
Putting speculation to rest, the White House announced Friday that it would be Bannon's last day, after he reached that agreement with Chief of Staff John Kelly. Stocks and other risk assets were already rising on early news reports that Trump was firing Bannon. The stock market later gave up much of those gains.
"I think this is trading on hope. The hope at least that Bannon was the bad apple in the barrel, and all it's going to take is another bad apple to pop up. Remember a lot's going on behind the scenes. The Russia investigation is continuing. This is just the latest drama," said Chandler.
Bannon's departure follows a bad week for the Trump administration, which has touted its ability to work with business and bring economic change to America. Trump alienated some of the top CEOs in America who were working with his administration when he failed to fully condemn white nationalists who participated in a violent and deadly protest in Charlottesville, Va.