Following Donald Trump’s failure to gather support for his healthcare plan, US stocks suffered their worst weekly performance since the November election. The S&P 500 sold off as it became patently clear that the alternative to Barack Obama’s Affordable Care Act lacked the votes to pass the House of Representatives. The S&P 500 then rebounded from its lows when The White House withdrew the bill, signalling that it was ready to move on from healthcare. The S&P 500 fell by 0.1 per cent on the day to close at its lowest level in a month, paring a 0.4 per cent advance at the open of trading and resulting in the worst week for stocks since Mr Trump’s election at down 1.4 per cent.
A plan to “repeal and replace” the Obama administration’s healthcare legislation was one of Mr Trump’s core campaign promises. Consequently, The White House’s decision to withdraw the bill represented a significant political defeat for the US President, whilst casting doubts on his ability to deliver on other priorities. Some argue that this mis-step on healthcare provides an incentive for Mr Trump to accelerate the rest of his agenda. David Donabedia, chief investment officer at Atlantic Trust, stated: “This increases the likelihood that you are going to a get a tax-cut package perhaps sooner than anticipated simply because of the political necessity.”
Some investors argue that the failed healthcare bill avoids a lengthy restructuring of the plan, a process that would have been slow and would have perhaps delayed tax cuts. However, a strategist with BlackRock emphasised that these developments are concerning for investors, stating: “[The healthcare bill] shows that president Trump has challenges uniting the different factions of the Republican party and if you are an investor positioning off of new tax reform and legislation changes, that is a worry.”