Markets tumbled on
Thursday after rumors swirled that Gary Cohn, President
Donald Trump’s top economic adviser and formerly Goldman Sach’s
number two, was resigning.
The S&P 500 slumped at around 10 a.m. ET, after the rumors
began swirling on Twitter. Gold, a traditional safe haven trade,
climbed as investors pulled into safety assets.
The White House denied this was happening, and Cohn (as of the
time this post was written) was still in. Still, Wall Street’s
jitteriness reflects fears that a Cohn departure would stifle
some of the administration’s business-friendly ideas.
“I don’t want to be an alarmist, but there is a lot of faith that
he is going to help carry through the tax reform that people are
looking for,” Yale School of Management’s Jeffrey Sonnenfeld told
CNBC on Thursday.
“I think if he steps away, it would crash markets.”Andy Kiersz/Business Insider
Stocks rallied after Trump’s November election as investors
considered the possibility of deregulation, fiscal stimulus, and
tax cuts. And they continued climbing, despite the nonstop
scandals and political dramas pouring out of the White House.
But already by spring, Wall Street was starting to itch.
“The biggest disappointment of 2017 has been Washington DC. Hopes
for transformative fiscal action have been dashed by the
inability to find legislative consensus, despite single-party
control of both Congress and the presidency,” a Morgan Stanley
team led by strategist Andrew Sheets wrote on April 20, after
the original health care bill was pulled from the House in
Now, several months later, the general business community appears
to have somewhat cooled towards Trump. In recent days, Merck CEO
Kenneth Frazier’s decision to resign from
the president’s manufacturing council was followed by an exodus
of other executives and led to the eventual disbanding of two
panels mostly made up of business leaders.
Against this backdrop, early Cohn exit could be enough to
break the market’s confidence in the Trump administration’s
ability to pass pro-business agenda, Jaret Seiberg, an analyst at
Cowen Washington Research Group, said in a note Thursday.
Isaac Boltansky at Compass Point echoed that sentiment in a
Thursday: “We have no insight into Mr. Cohn’s plans, but our
sense from client conversations is that his departure would
surely dampen Wall Street’s already dwindling confidence in
Washington’s capacity to govern.”