The market has seen this show before: A key member of the Trump administration walks out the door, leaving the investing world to ponder whether it's the sign of deeper dysfunction that could derail what has so far been a distinctly pro-business agenda.
Previous episodes, though, have resulted in few long-reaching effects, with the bull market resuming its path despite a few hiccups here and there.
Gary Cohn, though, is not Steve Bannon or Anthony Scaramucci or Reince Priebus or any of the other nearly two dozen top officials who have come and gone during President Donald Trump's first 14 months in office.
He was much more.
Cohn was a grown-up in the room, one of the few voices who would push back against key tenets of the president's ramrod style. He was not only a Wall Streeter but also a Democrat, a moderate voice during a time of extremes.
So with his departure as Trump's key economic advisor comes more serious questions, with one rising above all the rest: Can the president push forward a populist agenda that also nurtures the market and the delicate climate of American business sentiment?
Cohn's saga will provide the sternest test yet of the market's faith.
"This is the real risk here: sudden changes can cause, well, sudden changes," said Brad McMillan, chief investment officer at Commonwealth Financial Network. "He was seen as the voice of economic stability and a spokesperson for financial markets. His resignation leaves the president with a set of economic advisors largely seen as outside of the mainstream, or at least perceived as less aligned with Wall Street interests."
Markets reacted negatively the day after news broke that Cohn will be leaving. Losses were contained, though, and there seemed to be little fear that the sky was falling.
"This is not the end of the world," McMillan said. "Markets are likely to take a step back, as they did with the initial announcement, and wait to see what happens."
What happened
Though Cohn did not speak publicly Wednesday, his departure is widely believed to be driven by his distaste for the tariffs Trump announced last week on imported steel and aluminum.
Cohn nearly left last summer after he was unhappy with Trump's response to the racial unrest in Charlottesville, Virginia. He stayed on long enough to see his top priority — tax cuts — passed into law in December, but apparently was willing to go no further.
With the former Goldman Sachs chief operating officer leading the White House's globalist faction, his exit signals that the nationalist/protectionist bloc has gained a foothold inside the Oval Office.
The prospect is unnerving to those who have gotten used to an American economy that relies on cheap imports to keep the corporate bottom line churning.
"Protectionist policies will act like a wet blanket on global trade and markets continue to react negatively to these types of policies," said Charlie Ripley, senior investment strategist at Allianz Investment Management.
Not all markets, though: Small-cap stocks, a group that would benefit from economic nationalism, rallied more than 0.5 percent at one point Wednesday.
As for the rest of the market, strategists remained fairly sanguine over the longer-term prospects, with sentiment pointing in the direction of further strength ahead as investors stay focused on the macro picture.
"We do not expect trade risks to derail the bull market, and economic fundamentals remain sound overall," said Ryan Detrick, senior market strategist at LPL Financial. "Trade will likely continue to be a source of increased market volatility" though he sees "manageable losses" as the likely effect.
What's next
Of course, much of how the market reacts depends on Trump and how he proceeds.
Should he replace Cohn with a like-minded moderate, investors likely will barely notice. But if he decides to go hard-line protectionist with the pick, that could spell trouble at a time when the market already has had to withstand a volatility swell the likes of which it hasn't seen in years.
In short, Trump has to get this one right.
"Clearly it's important. At the same time, it's important for him to do it fairly quickly," Detrick said. "His views were much different than Trump. For the hawks to have more power is clearly the worry."
A trade war is a central tenet of the worst-case scenario many economists painted for Trump as president during the 2016 campaign and leading up to his term.
While the direct economic impact of the steel and aluminum tariffs is negligible, the prospect of them inviting retribution from trading partners could be just the thing that would kill the goodwill, enthusiasm and trust the president has built with corporate leaders and investors.
Still, Wall Street has gotten somewhat used to the constant drumbeat of strange headlines out of Washington, D.C.
"Our politics have gone back to what they looked like 100 years ago. Our politics used to be brutal and very, very nasty. So here we are," said Christopher Whalen, head of Whalen Global Advisors. "The Street always gets comfortable after a day or two of tantrums. I'm not worried about that."
WATCH: Former White House official Scaramucci talks Cohn and markets.
