Select Page

U.S. stocks rallied today on “news” that Republicans had reached a deal to repeal and replace Obamacare. The Standard & Poor’s 500 stock index closed up 0.76% to 2355.92.

I put “news” in quotes because the full story out of Washington today is extremely far away from any deal. The rally in U.S stocks today on that “news” is an indication of exactly how determined Wall Street is to believe that the Republicans who control Congress and the White House are ready to move on the anticipated big tax cuts that have fueled the most recent stages of this rally. Without those tax cuts or at least the promise of those cuts, Wall Street will have to take a hard look at valuations in the U.S. stock market and Wall Street would prefer not to go there right now.

The actual “news” this morning was that the leaders of the ultra-conservative Freedom Caucus and the somewhat more moderate Tuesday Group have agreed on a deal that would allow states to get waivers to eliminate the provision in Obamacare that prohibits insurers from charging higher premiums to people with pre-existing conditions. The deal would also put the Essential Health Benefits guarantee– list of benefits such as the ability of children to stay on their parents health insurance until the age of 26–back into the Republican bill, the American Healthcare Act. States would again have the ability to apply for a waiver of those conditions if they could show that a waiver of these requirements would lower premiums, increase the number of people insured, or “advance another benefit to the public interest in the state.” Those waiver terms are vague enough so that you could drive the entire state of Alabama through them. Which is indeed the point.

The reason I’d hesitate to call this a deal is that while House Freedom Caucus chairman Mark Meadows (R-N.C.) and Tuesday Group co-chairman Tom MacArthur (R-N.J.) have agreed on this language, it’s not clear how many members of their groups actually support these changes. Nor have the Senate and House GOP leaders joined the amendments, so far. And, in a measure of continued Republican disarray, the White House and leaders of Congressional Republicans remain divided on a schedule for attempting another vote on the bill with the Trump administration pushing for a vote in the House of Representatives next week. That’s a strange schedule given that Congress has to pass a spending bill by April 28 in order to keep the government’s doors open. (Congress doesn’t actually return to session until Monday.) On Thursday a senior House Republican aide told Bloomberg that revised language for a bill hasn’t been agreed on and there’s no text yet for lawmakers to review. There’s no target date for a vote, whether next week or at any future time, the aide said. White House hopes for a vote next week seem to be driven by a desire to report a legislative success on April 29, which would be Donald Trump’s 100th day in office.

There is also just the little matter that no one knows whether a bill with these amendments would pass the House as a whole. To me, it doesn’t look like it would pass the Senate, where moderate Republicans continue to have trouble with a bill that would end health insurance for 24 million Americans, many of whom voted for Donald Trump.

I’d be surprised if the hopes for this amendment that pushed the market up today survive a night of close thought.

And if the Trump White House and the Republican Congress continue to remain divided on the strategy and timing for turning to tax cuts, I think we’ll see a quick return of the worries that took U.S. stocks down in the first part of this week. If the Trump administration doesn’t move quickly and in an organized fashion on a tax plan then even Treasury Secretary Steve Mnuchin’s schedule for a vote on tax cuts by the end of the year (it had been August) is in doubt.