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What's going on?
Amid signs of turbulence over President Trumps agenda in Washington, US stocks had their worst day in six months on Tuesday!
What does this mean?
US stocks went 109 days without selling off by more than 1%… until Tuesday (tweet this). Its always difficult to pinpoint what exactly causes the market to sell off, but stock prices accelerated their move lower as more and more comments came out of Washington suggesting that the Republican healthcare package, due for a Congressional vote on Thursday, may fail to get enough votes in its current form.
While the market doesnt care a great deal about healthcare per se, its a sign that Trump and Republican allies in Congress are struggling to get their plans passed into law. More specifically, partly for procedural reasons, Congress is attempting to pass healthcare reform before passing laws aimed at cutting corporate taxes an issue the market cares a lot about and so a delay to healthcare could very conceivably mean a delay to tax reform.
Why should I care?
For the markets: Were getting a test of how important Washington is to markets right now.
Optimism over Trumps policies, like lower taxes, certainly helped drive the big move higher in stock prices in recent months. However, it hasnt been the only tailwind for stocks. The US and global economy have seemingly been picking up steam and companies profits have been rising. Investors will be paying attention to these factors as well, as they try to figure out how much more, if at all, stocks should sell off.
The bigger picture: A pullback in stock prices is totally normal.
Markets never go up in a straight line: it has always been a case of two steps forward, one step back. The fact that the market has gone so long without this magnitude of a pullback is actually the surprising thing!
Originally posted as part of the Finimize daily email.
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