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President Donald Trump's economic agenda will continue forward — even if he's not the one leading the way.
With Trump facing a low point in his popularity and an increasingly testy relationship with his own Republican Party, questions arise over what authority he'll have to push a pro-business platform through the halls of Congress.
However, the calamitous climate may not matter. Trump's hopes for tax reform, lowered regulatory barriers and a boost in infrastructure spending all likely have enough support without his leadership.
In fact, a distracted president could be an advantage, bringing together the warring congressional factions in a common cause.
"Fearful of losing their party, and losing the 2018 election, Republicans on Capitol Hill are nearing a consensus: it's time to go it alone, ignoring the dysfunctional White House and proceeding on legislation without input from President Trump," Greg Valliere, chief global strategist at Horizon Investments, said in his daily note Friday. "It's their only hope, and it could produce results."
What those results would look like is unclear. Wall Street already appears ready to accept a corporate tax rate above the 15 percent Trump wants but still below the current 35 percent level, and may have to settle for less infrastructure spending than the $1 trillion the president has targeted.
But that would be better than having to face angry constituents during the midterm elections with nothing to show for having full Capitol Hill control.
According to Valliere:
"Trump is irrelevant on issues like taxes," a GOP source told us last night. "We have a job to do, and we want him to butt out." In fact, some Republicans are talking about overtures to Democrats, who may help produce a bill to fund health insurers. Even more intriguingly, some GOP lawmakers are floating a trial balloon — let's combine tax cuts with infrastructure spending, which could appeal to Democrats.
In any event, hopes that Congress still can proceed with the president's pro-growth, pro-business agenda seems to be what's keeping a floor under the stock market.
While stocks have fallen during August — traditionally the worst month of the year — the market has remained resilient through the year even as the Trump agenda has stalled and the level of political theater has soared.
Investors remain hopeful that the underpinnings of this latest leg of the eight-year bull market remain intact — specifically, a Congress that can overcome dysfunction and implement pro-growth policies.
"The question is, can they join forces and accomplish that?" said Quincy Krosby, chief market strategist at Prudential Financial "This isn't just about a win for the White House or a win for the Republican Party, it's ultimately a win for the country."
Krosby also sees the Republicans as intent on implementing the Trump agenda even as they move away from him politically.
"It's very clear that Republicans seem to be distancing themselves from him, the business community is distancing itself from him. You don't want a leader who appears to be isolated," she said. "Let's remember, it isn't as if the Democrats have found tax reform alien, by no means. Over the years, conservative Democrats have suggested that we need to fix the corporate tax structure."
Of course, there are multiple other factors at play.
The markets Friday, for instance, recouped losses after word leaked out that Trump was dumping top advisor Steve Bannon — an indication, perhaps, that the administration was not embracing the latter's brand of economic nationalism.
Some strategists also are worried that the jump in corporate profits this year may not last, with that, too, taking down sentiment.
And there's also the belief in some quarters that the market isn't moving on the Trump agenda at all.
"I really don't know how many people left who think they are going to have anything significant done this year or even by the midterms," said Jim Paulsen, chief investment strategist at the Leuthold Group.
"The wind under Trump's magic carpet is basically economic momentum," he added. "If that stays good, Trump can pretty much do or say anything."