Now what will the nervy Wall Street investor do now that Donald Trump has been exposed as a bit of charlatan so far as working ‘miracles’ for investors to share with his policies.
The defeat of Trump’s healthcare policy on Friday by his withdrawing it from a key vote (which would have been lost to even greater embarrassment) changes the complexion of the US investment outlook – especially where that intersects with politics and stockmarket activity.
While traders all but ignored the loss on healthcare on Friday – it will be something they will focus on today and tonight.
Trump is now talking about moving to tax reform, but you have to wonder if it is so wonderful, why it wasn’t the first big ticket issue tackled – he may have gotten a win?
That will make investors increasingly nervous that other big ticket item such as tax cuts and more spending on infrastructure won’t happen, or face long battles to be approved running well into 2018 which is a mid term election campaign year.
Before all that can happen, the Trump administration has to win Congressional approval for a lift in the US debt ceiling this year.
After the healthcare loss, a win on this most important process is a not a given.
The Tea Party fanatics on the hard right of the Republican Party who caused the healthcare bill to be abandoned on Friday (and who are ignoring the impact of their spending cuts, already seen in the proposed 2017 Federal Budget) are also capable of blocking any move to raise the limit, without attaching big spending cuts (though not in defence).
That issue will start looming larger and larger as we move past June when it will become harder to juggle the US government’s finances to avoid breaking the limit. The normal influx of tax payments from April onwards will ease the pressures for a while, but it is an issue ratings group such as S&P and Moody’s are already watching. S&P cut America’s triple A rating to AA (minus, then plus) the last time this happened five years ago under President Obama.
Wall Street week definitely had a second look at Trump and his policies and started worrying.
Stocks closed mostly lower overnight Friday, with major indexes posting their biggest weekly losses in months. Eurozone shares were flat on Friday and the US S&P 500 lost 0.1%.
Wall Street had a bit of a roller coaster session – initially rising 0.4%, then falling 0.4% as the vote on replacing Obamacare was pulled, only to end little changed as the focus moved on to tax reform.
As a result of this flat lead ASX futures rose just 1 point (or 0.02%) on Friday night meaning a flat open for the Australian share market on later this morning.
US shares fell 1.4%, Eurozone shares fell 0.2%, Japanese shares lost 1.7% and Australian shares fell 0.8% last week.
The $US also fell, but this didn’t stop a decline in the $A. Gold rose, oil fell, as did copper and iron ore.
The S&P 500 index closed 1.98 points, or 0.1%, lower at 2,343.98 early Saturday and over the week, the index lost 1.4%, its biggest fall since November.
Financials sector suffered a 3.8% loss over the week, its largest decline since January 2016.
The Dow dropped 59.86 points, or 0.3%, to 20,596.72 and lost 1.5% over the week, its steepest decline since September. And the Nasdaq Composite Index eked out a small gain, rising 11.04 points, or 0.2%, to 5,838.74. But it shed 1.2% over the week, its largest weekly loss since December.
In Australia the ASX200 rose 0.8% to 5753.5 on Friday, narrowing the weekly loss to just 0.8%
Westpac shares lost 2%, while the CBA was off 1.6%. That was despite solid rises on Friday.
Some retailers were weak – Myer which lost 6.2% and Harvey Norman down 7.8% over the brawl with ASIC and whether it was reviewing or investigating the company’s accounts.
Telstra had a bad week, off 3.5%, and the miners also fell: BHP lost 2.2%, Rio 4.6% and Fortescue Metals 6.7% as the Chinese iron ore price dropped $US6 to around $US86 a tonne to be down more than 7%.
The move by China to reverse its previously announced tightening of the rules on ecommerce imports was a big deal in the market.
As a result Blackmores shares leapt 19%, while Bellamy’s surged 21% and shares in A2 Milk ended up 7.4%.
