US: The market’s first litmus test – TDS

According to the research team at TDS, Thursday’s House vote on the American Health Care Act (AHCA) may be a key litmus test of the Trump agenda and markets are concerned about House Republicans’ potential inability to pass AHCA.

Key Quotes

“This would be seen as a sign that the remainder of Trump’s legislative agenda (tax reform and infrastructure spending) could be delayed further.”

“Ahead of the vote, Tuesday’s Freedom Caucus decision on whether to release its members to vote individually or retain a bloc vote could serve as a preliminary litmus test. Media reports have suggested that voting as a bloc, this group could lead the AHCA vote to fail. However, a decision to allow its members to vote individually could increase the odds of a successful vote.”

“Given that Obamacare repeal is a prerequisite to tax reform, we expect Republicans and the White House to make a strong push for passage, keeping the legislative timeline for tax reform and infrastructure spending on track. The uncertainty surrounding AHCA passage is already spooking the markets, but we expect eventual passage.”

“Furthermore, we expect sellers to return to the market as we head to the lower end of the recent 2.33%-2.64% range.”