Health Care Act is ‘Trump on, Trump off’

May 4, 2017 11:19 AM

Major market decisions out of last week into this week seem stalled by the looming next House of Representatives vote on the Trump administration’s American Health Care Act (AHCA), the fraught repeal and replacement for Obamacare. The fate of this legislation is a key indication for two key market factors flowing from Washington DC.

The first is whether the Trump administration’s success in enacting various measures in its first 100 days (see last Friday’s Hundred Days’ is a ‘fake’ metric post) can also overcome the lack of any major legislation success. That will reflect on a purely psychological level of Republican House leadership. That will secondly also be critical for even more important legislation which will quickly follow the healthcare effort.

The problem is the Republicans are predictably getting no assistance at all from Democrats with replacing the flawed previous health insurance program. And the diverse demands of conservative and moderate factions within the Republican Party had also prevented them from passing the bill on their own last month. 

Markets stalled

Therefore, the bottom line on so many stalled markets appearing to be the proverbial deer caught in the headlights is directly related to whether Trump administration reforms look likely to succeed or significantly vexed on the current Trump trade. It is a "Trump on, Trump off" market into the next vote on the Trump administration’s AHCA scheduled for today… or if the votes to pass it are not confirmed, maybe Friday.

Of course, that is a pseudonym for the more familiar alternating "risk-on" and "risk off" psychologies that regularly affect market psychology. Yet these rapid reversals on the potential success of the AHCA vote have left the markets stuck instead of inspired. 

That is in part due to the AHCA being a necessary precursor to getting the more important tax reform right. While the administration might deny that, along with other observers we feel that without a clear fiscal bottom line on government health insurance costs it will be very hard to present a definitive tax reform program. So, more market psychology than just healthcare indications are riding on the AHCA vote.

Rapid shifts

And it is once again the rapidity of the changes in sentiment on whether the AHCA can indeed pass through those highly diverse Republican Party factions either today or on Friday that has left the markets so perplexed. As opposed to still very big surprises which hit the markets on last year’s UK Brexit vote and the election of Donald Trump as U.S. President, the significant AHCA success or failure ‘binary’ decision has seen many more tightly spaced reversals of sentiment.

In that way, the "Trump on, Trump off" psychology that goes well beyond just the healthcare reform (as noted above) is going to be a significant factor for the markets over the next couple of days. As a caveat to that timing, we suppose that any lack of the votes to pass the AHCA might leave the House leadership deferring it into next week.

Yet, after already delaying it out of last week (which was an insane commitment in the context of the major budget decision deadline into last Friday), any delay beyond this Friday would be as troubling as it would be embarrassing for the House leadership and administration.

Reversals seem like "The Clapper"

Getting back to the serial short-term frequency of reversals of the success potential for the AHCA, it almost feels like the advertisements for the electronic product The Clapper, which have been so ubiquitous into the U.S. winter holidays for decades. As we are not sure whether this product or the adverts are as well known outside the U.S. as over here, possibly some of our non-U.S. viewers would benefit from watching one of the more interesting The Clapper television commercials, accessible here.

While we need to allow that AHCA success expectation reversals have been nowhere near the frequency of World Class Clapper Kent French’s 721 claps per minute, over the past several weeks those AHCA sentiment reversals have seemed to come and go as easily as the overall function of The Clapper. The shifts between the Republican’s very conservative Freedom Caucus demands being met, yet that demotivating more moderate Republicans are (sadly) now legend.


Still, the various adjustments and amendments now seem to have satisfied the broader party enough to allow for success in passing the AHCA into law over the protestations of the obstructionist Democrats that it is mean and doomed to fail. And even some within the Republican Party have criticized the process as being too messy. Yet this is the way it always was prior to the lack of activity under the Obama White House, especially once an obstructionist Republican Congress refused to cooperate after the 2010 U.S. bi-election.

As they say, the two things that nobody should want to see made are laws and sausages. In fact, some of our foodie friends protest that this is an unfair criticism of the sausage creation process, which includes many gourmet varieties produced in more modern facilities to exacting standards. Nobody can claim that the Congressional legislation process has been through any similar modernization.

However, in spite of the criticism from quite a few Republicans on the process and the resulting opt-outs which needed to be included in the AHCA to allegedly attract the necessary votes (we shall see), this is a healthy process that is just what the founding fathers envisioned.

The "Creative Third"

And in part, this is what has been missing from previously successful efforts in all of American politics in recent years. This sort of vigorous debate that reconciles the best ideas from various factions (and hopefully eliminates weaker proposals) can be considered a "Creative Third." That is the unseated third party at the table which embodies the synthesis of the best ideas on both sides into a more productive and effective end result than either side might have brought to the table in the first place.

So in its way, yes, "success.’" And, hopefully, the Democrats in Congress can get over their purely obstructionist “Trump doesn’t deserve to be President” psychology (justified on many spacious levels), and get back into ‘loyal opposition’ mode to infuse their best ideas into the mix sometime soon. There are always some better ideas on each side than the hardcore opponents on the other side would deign to admit, and it would be nice to get back to a more collegial Congress sooner than not.   

Who knows, Congress might even lift its approval rating out of the gutter. Recall that the successful vote on Obamacare legislation was also a very close run thing, and there is no guarantee the current Republican Senate will pass a similarly acceptable healthcare bill.

Thanks for your interest.

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About the Author

Alan Rohrbach is Lead Analyst and President of Rohr International, Inc.  He is an international equity index, interest rate and foreign exchange trend advisor. His forte is ‘macro-technical’ analysis of how fundamental influences blend with technical aspects to drive trend psychology. Clients include international banks, hedge funds, other portfolio managers and individual traders.