Trump tanks the market by stopping stimulus talks — What the pros are doing from here

Published Tue, Oct 6 20203:25 PM EDTUpdated Tue, Oct 6 20204:33 PM EDT

(This story is for CNBC Pro subscribers only.) President Donald Trump just informed Americans that the White House would stop negotiating a second stimulus package until after the November election and stocks tanked . "I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business," Trump said in a tweet on Tuesday. CNBC asked the Pros about Trump's strategy and how to play it in the market. Here's what they said: Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group, told CNBC: "Maybe spending this money isn't as important to [Trump]. Maybe he feels that the economy can stand on its own two feet without another $2 trillion of government spending. This comes in the context of Congress that's already spent $3 trillion and there's still a wide gap between what the Republicans are willing to spend, $1.6 trillion, and what the Democrats want to spend at $2.2 trillion." "At least for now I'm believing that this is part of a negotiation rather than something that's firm," added Boockvar. "Both sides don't like each other. Both sides don't want to give an inch to the other side." Adam Crisafulli, founder of Vital Knowledge, said in a note: "Investors are really focused on the potential for a Dem sweep on 11/4 and what that could mean for 2021 fiscal stimulus. If anything, Trump ending these talks only makes a Dem sweep more likely." Dennis DeBusschere, macro research analyst at Evercore ISI, said in a note: "It will now come down to who sweeps and how much stimulus we get and what it looks like under either a Republican or Democratic congress/President. For now...the sweep scenario clearly favors the Dems. That is why unwind stimulus trades should not be taken to far." Ed Mills, Washington Policy Analyst at Raymond James, told CNBC: "It is clear to me that the markets have wanted a deal and Trump's rejection is a negative. After last week's inability to get a deal done, people have largely pivoted towards a post-election timeframe. In terms of a path forward, the quickest post-election deal comes in a Trump reelection, but the largest comes in a Democratic sweep. I think there would be considerable uncertainty about the size and scope in a Biden win and Republican Senate majority." Mills on CNBC's "Closing Bell:" "Politics got in the way it is too late to be negotiating a package this close to the election. And I think that the real miss was not getting this done closer to the July 31 deadline for when unemployment expired on the federal level, or trying to get it done early on when Congress came back in September, quite frankly, both sides, kind of made their position too hard." "I think one thing that is really uncertain today is kind of why would he be the one that comes out that he rejects the deal, in that it is squarely on him as to why things have ended. In politics 101 it's usually trying to blame the other side. He certainly does try to blame Pelosi here, but I think it goes back to what he has been trying to run on for his reelection, was that Covid is over, and that the health and economic consequences we dealt with those earlier in the year, and things have turned the corner. To negotiate a multi trillion dollar Covid deal is to admit that the economic impact is greater than what the campaign has been willing to say." Michael Feroli, J.P. Morgan's chief U.S. economist, said on CNBC's "Closing Bell:" "I don't think necessarily that this means we'll have a double dip recession. I think a few months ago it may have felt that way, and it may be one of the reasons why there was less urgency in Washington to get something done … I do think the economy can stand on its own two feet. I think the stimulus however would have done two things, it would have taken out, or at least removed some of the downside risk in case we do have a double dip recession, which I don't think is likely but it's certainly a possibility, more stimulus would have been insurance against that. And secondly, even without a double dip recession we remain about 11 million jobs below where we were and while we're closing that gap we're closing it at a slower and slower rate each month." Tom Block, Washington policy strategist at Fundstrat, told CNBC: "I'm just shocked, I'm very surprised. It's just so disruptive. On Saturday he had a very positive tweet … when the president says I'm done it's done. There's no going around the president … My view is that this is negative for the market. Chairman Powell has said that we need more stimulus, and this is going against the advice of the chairman of the federal reserve and the markets don't really like going against the advice of the chairman of the federal reserve...I would not say it's over for good but I would say it's a very negative sign and likely pushes it until after the election." — with reporting from CNBC's Michael Bloom and Pippa Stevens.

US President Donald Trump walks to Marine One prior to departure from the South Lawn of the White House in Washington, DC, October 2, 2020, as he heads to Walter Reed Military Medical Center, after testing positive for Covid-19.

Saul Loeb | AFP | Getty Images

(This story is for CNBC Pro subscribers only.)

President Donald Trump just informed Americans that the White House would stop negotiating a second stimulus package until after the November election and stocks tanked.

"I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business," Trump said in a tweet on Tuesday.

CNBC asked the Pros about Trump's strategy and how to play it in the market. Here's what they said: