Market Impact of Republicans’ Insurance Debacle Far From Clear

Having stiff-armed political risk for quite a while, market participants now have to think a lot more about the issue in general -- and specifically, about how much the Trump administration’s legislative agenda will suffer on account of Republicans’ last-minute decision on Friday to pull their health-care bill from an imminent vote on the floor of the House of Representatives. Some may be inclined to predict other failures that would impact forthcoming economic bills, given the erosion of Republicans’ political capital and the Washington blame game that’s sure to play out. But the situation on the ground is a lot more complicated than that.

The derailment of a legislative effort strongly pushed by the president and House Speaker Paul Ryan raises questions about the credibility and influence of the most important members of the Republican Party. This matters to investors, if only because stock markets have already been materially boosted by the view that Republican control of the White House and both chambers of Congress opened the way for the passage of pro-economic-growth and pro-corporate-earnings legislation. Washington now finds itself in a massive political storm whose possible implications go well beyond health care and political theater.