U.S. equities and stock exchange traded funds rose Thursday ahead of a planned vote on a healthcare bill in Congress that could set the tone on the Donald Trump administration’s future policy changes.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.1% higher Thursday. U.S. markets continued to regain ground after a major sell-off Tuesday in what was the worst day for stocks since the election.
Traders, though, remain cautious as President Trump tries to make a final effort to secure the necessary votes to replace the Affordable Care Act, or Obamacare, in the House of Representatives as signs point to a number of Republicans defecting, which may threaten the new administration’s priorities, reports Tanya Agrawal for Reuters.
“The most important issue for financial markets is for Congress to be finished with this bill one way or another so that it can move forward with tax reform, which is likely to have a greater effect on corporate earnings and the real economy,” Alec Phillips, U.S. political economist at Goldman Sachs, told the Wall Street Journal.
The House is expected to tally the votes on Thursday. A losing vote or any delays could weigh on confidence in the new administration’s ability to deliver on his promises of tax cuts, deregulation and fiscal spending, a number of policy points that have supported the recently strong economic outlook and so-called Trump rally. Some are now concerned that the rally in equities have pushed valuations over fundamentals.
“Perhaps the market is a bit ahead of itself,” Bill Northey, chief investment officer at the private client group of U.S. Bank, told the WSJ. “There’s been very clear evidence of momentum building in the global economy but having some of those policies, namely tax reform and some of the regulatory rollbacks, has clearly been part of what’s driving markets.”
Concerns over Trump’s ability to pass through his legislative agenda through Congress triggered the largest one-day sell-off since before the elections on Tuesday.
“There’s been a lot of optimism regarding the Trump administration so this could very well be the first setback,” Erik Davidson, chief investment officer at Wells Fargo Private Bank, told Reuters. “What the market wants is to get through the healthcare question so that we can move on to tax reform.”
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