Markets are reeling this morning in the wake of the failure for Donald Trump to push his healthcare legislation through Congress. On the surface this does not seem to be a big deal, however it is the implications that this has for Trump’s presidency that the market is concerned about. We look at how traders are reacting and how this is impacting on forex, equities, and commodities markets going forward.
If the failed healthcare bill tells us anything, it is that Donald Trump will not get an easy ride as US President. Rolling back President Obama’s flagship Affordable Care Act has been an aim of the Republicans for years and is Trump’s first significant legislative move and the market has been taking the progress as a lead indicator for how successful Trump may be in pushing through his proposed fiscal plans. If Trump cannot push through changes to Obamacare, which has long been the bugbear for Republicans, the fear is that Trump will be unable to achieve a fiscal expansion that would significantly increase the national debt. Legislation that increases debt has traditionally been viewed with significant scepticism by most Republicans. US Treasury Secretary Steve Mnuchin has already laid the groundwork for a battle after labelling the debt ceiling as a “ridiculous concept”, but quite whether his party will go with him remains to be seen. The failure to pass Trump’s healthcare bill reveals the slog and potential deadlock yet to come. This became an issue for markets last week, and is now driving an unwinding of the “Trump-trade”. Safe haven assets have been outperforming, with Treasury yields beginning to earnestly unwind the sharp gains since November. With a reduction in risk appetite, this has also driven gold and the yen higher, whilst equities are also now threatening a deeper correction.