A comment from U.S. House of Representatives Speaker Paul Ryan may have helped to trigger one of the biggest reversals in stocks in more than a year, a down move that could continue Thursday.
A big reason behind the push for post-U.S. presidential election stock gains in recent months has been the reflation theory, that U.S. President Donald Trump would move forward with his ambitious plans to boost the economy, including with tax reform. However, his inability to get a Republican-led health-care bill pushed through has given some investors pause.
Senior White House advisers have been struggling for a consensus about the shape of the tax plan or the strategy, The Wall Street Journal reported Wednesday, citing several senior administration officials. One official said the current goal for a plan by August may turn out to be ambitious.
Enter Ryan—who has been blamed in some corners of Washington for failing to round up the votes needed to get the GOP health-care plan passed—with some more bad news for stock bulls. He told an audience in Washington, D.C., on Wednesday that tax reform could take longer than repealing and replacing Obamacare would, according to Reuters:
‘The House has a (tax reform) plan but the Senate doesn’t quite have one yet. They’re working on one. The White House hasn’t nailed it down.’
In short, he said “even the three entities aren’t on the same page yet,” when it comes to tax reform.
“Any hope of tax reform materializing in August is actively being priced out of markets
here,” Chris Weston, IG’s chief market strategist told clients in a note Thursday, citing Ryan’s comments.
After Wednesday’s retreat, U.S. stock futures pointed to another struggle Thursday, partly driven by the Federal Reserve’s admission in its latest minutes that it will wind down its balance sheet sooner than expected.
Read: The stock market just blew its biggest lead since February 2016
Meanwhile, a document reportedly due for release Thursday showed that seven U.S. Republican states won by Trump in the 2016 presidential election will be hard hit if the Republican-backed border-adjusted tax becomes a reality, as part of the tax-reform goals.
Those states are: Georgia, Kentucky, Louisiana, Michigan, South Carolina, Tennessee and Texas, reported CNBC. California, New Jersey and Illinois, states that Democratic rival Hillary Clinton carried, are also set to be hit, according to a document due to be released Thursday by the conservative group Freedom Partners and Americans for Prosperity.