A republican-led attempt to repeal parts of the Affordable Care Act (Obamacare) fell just short late last night/early this morning in the Senate. The proposed repeal would have cut out individual mandates and the requirement for large employers to offer insurance. In total, three republicans voted against party lines but the most notable of the nay votes came from Sen. John McCain.

Needless to say, reaction was predictably mixed.



The market reaction was also mixed—at least in terms of perception. Health care stocks were down just a bit in the first hour of trading today. For context, VHT (a Vanguard Health Care ETF held by some Narwhal clients) is down 0.31%. But at the time of publication (10:25 AM), that performance is actually slightly better than the market’s performance as a whole. The S&P 500 is down 0.35%.

Perhaps most interestingly, this seems to be further evidence against the notion of a “Trump Bump” of euphoric and undue market optimism. In our second quarter newsletter (available in its entirety here), we questioned those who attribute the current market run entirely to the President:

Those who credit Trump for the market’s rise this year (The S&P 500 is up more than nine percent over the first two quarters), are short-sighted. Sure, Trump may ultimately oversee the passing of a debatably better healthcare bill and at some point meaningful tax reform may come to fruition. But, if you believe the market was already accounting for these changes in the late stages of 2016 and the opening months of 2017, how do you explain the market’s continued rally despite only residual progress on healthcare and no tangible advancement on tax cuts? If the market had truly been responding solely to Trump’s potential, then recent impediments would have curtailed the market’s run up. That has not been the case.


Knowing what we know now, that case seems strengthened. If the market had been rising solely based on Trump-proposed changes for the past eight or nine months, a lack of support from noteworthy republicans on the repealing of Obamacare could have sent the market into a tailspin. We’re just not seeing that. In fact, the market is largely being weighed down by consumer discretionary stocks. The Vanguard Consumer Discretionary ETF (ticker VCR) is down 0.80% at the time of publication. Notably, Amazon (ticker AMZN), which is the largest holding in that ETF and the third-largest weighting of the S&P 500, is down nearly 3.50%.

What’s the read-through here? Well, for starters, everyone should probably pay a little bit less attention to political headlines. As we’re seeing today, a big legislative defeat for Trump isn’t bleeding the market dry. And in the meantime, all investors should remain focused on asset allocation (that’s tough with markets so high) and searching for value. Beyond that, keeping an eye on tax reform seems wise. The impact of a lower corporate tax is much easier to process and such changes would likely be processed by the market rather quickly.

Note: Narwhal Capital employees and clients own AMZN, VCR, VHT.


Andrew Hall is the Vice President of Narwhal Capital Management.

Please see our General Disclosure.

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