Drama in DC

The tension in the air was palpable as market participants waited for the initiation of a vote on the health care bill. In an 11^th hour move, with under a half hour before the House was set to vote, President Trump asked House leaders to cancel today’s vote.

Leading up to the vote, which did not occur today, traders and investors were left in a vacuum. As such, we saw wild gyrations in US equities. After trading roughly 50 points higher this morning, the Dow Jones industrial average plunged. It became more apparent that if the House did vote on the ACHA health bill, it had little or no chance of passing.

Market participants have put a high priority on this new administration’s ability to approve the Republican health care bill, and for a good reason. President Trump has promised a total revamp of the way Washington does business. He has promised significant changes such as tax reform, the initiation of major infrastructure projects, renegotiated trade agreements, and yes, repealing and replacing Obamacare.

The emphasis placed on today’s vote was because market participants viewed the outcome of this gateway bill. It would be an indication as to whether President Trump is going to be able to convert other campaign promises into new legislation. In other words, the success of today’s vote would be an indication that there would be a high probability of success as the President tackled other campaign pledges.

Secondly, and extremely critical, is the fact that without repealing Obamacare, President Trump’s promise of major tax reform would be virtually impossible. This is based on the fact that the costs involved in Obama care are so high and so taxing. Without changing Obamacare as it stands, tax cuts would be extremely difficult, if not impossible, to achieve.

The fear of a significant market correction in the US equities markets if the AHCA bill failed to pass weighed heavily on the minds of investors and traders. As such, gold prices were trading moderately higher intraday, and US equities were trading under pressure. However once the announcement was made that they had canceled today’s vote, a relief valve was hit with the net result of lower gold prices today, and US equities gaining back much of the intraday losses.

Wishing you as always, good trading,