Most people who work in corporate America don’t have to worry about health insurance. So the failure of Republicans to repeal Obamacare was not likely to affect them directly. But Matthew Zeitlin says that it has Wall Street investors nervous.
As Republican attempts to kill Obamacare flamed out spectacularly, investors began rethinking an assumption that caused markets to rally for months: perhaps the Trump administration and its allies in Congress, they suddenly realized, won’t pull off the sweeping tax cuts that many have been expecting.
Since the election, investors have been betting that unified Republican control of Washington will make it rain for big businesses and the wealthy. The “Trump Trade” helped push the S&P 500 up by 12% between election day and March 1, and executives and major investors have spoken glowingly of a new optimism in the US economy.
But that thinking — and the market rally that came with it — has begun to recede.
Along the same lines, Mike Allen reports on what he heard from an executive at a money-center bank:
Holy crap! We may not get tax reform, or a repatriation bill, or infrastructure spend, or substantial changes to regulations.”
This is what I meant earlier when I talked about the smell of failure hanging in the air. Corporate America, Wall Street investors and their lobbyists are smart enough to have figured out the uphill battle Trump and Republicans now face on tax reform.
I was immediately reminded of what Alan Murray wrote about what Trump promised in order to secure the Carrier deal.
A source close to the company said President-elect Trump called Greg Hayes, CEO of Carrier’s parent company United Technologies, two weeks ago and asked him to rethink the decision to close the Carrier plant in Indiana.
Hayes explained that the jobs were lower-wage and had high turnover, and the move was necessary to keep the plant competitive, according to the source. He said the plan would save the company $65 million a year.
President-elect Trump replied that those savings would be dwarfed by the savings UTC would enjoy from corporate tax-rate reductions he planned to put in place.
Apparently Hayes bought the idea that Trump would deliver on tax cuts that would save the company more than $65 million a year. Betting on Trump and this Congress was clearly not a great business decision.
But since that Carrier deal, several other corporations have lined up to announce new investments and jobs that have actually been in the works for months and/or years prior to Trump’s election. In a sense, they’ve all been willing to kiss the emperor’s ring in the hopes of getting in his good graces and walking away with their tax cuts.
As the smart ones start to figure out that’s not necessarily a slam dunk, it will be interesting to see if the parade to Trump’s door continues.