- Reports that Gary Cohn, the top White House economic adviser, would depart the Trump administration sparked immediate selling in global equity markets.
- Experts across Wall Street have weighed in with their thoughts.
The reaction was swift and strong, as S&P 500 futures immediately tumbled in after-hours trading. The nervousness then spread throughout global markets overnight, dragging indexes in Asia and Europe lower before US benchmarks opened in the red on Wednesday morning.
The broad-based weakness signals investors are worried that Trump’s recent protectionist behavior — most notably his proposed tariffs on steel and aluminum — will spur a trade war. Concerns include retaliation from other countries and a negative economic impact that could wind up costing the US hundreds of thousands of jobs.
Trump pushed forward with his tariff announcement last week despite protests from Cohn, Politico reported. There has also been speculation the Trump administration may be close to clamping down on Chinese investments in the US and imposing tariffs on imports.
Cohn’s departure and the subsequent trade-war-driven market turmoil has been enough to get everyone on Wall Street talking, and they delivered a wide range of reactions on Wednesday.
Here’s a roundup of the most insightful commentary.
Chris Krueger, a strategist at Cowen Washington Research Group
“Wall Street just lost its security blanket,” Krueger said, adding: “We can think of no one who can fill this seat that will give Wall Street as much comfort as Cohn — particularly with the protectionists on the rise and tariffs top of the agenda.”
He continued: “It is not just Cohn’s offensive market skill that will be missed — he was arguably the best defensive player in the West Wing keeping the protectionist advances at bay.”
Brad McMillan, the chief investment officer of Commonwealth Financial Network, which oversees $156 billion
Cohn was “seen as the voice of economic stability and a spokesperson for financial markets,” McMillan said.
“His resignation leaves the president with a set of economic advisers largely seen as outside of the mainstream, or at least perceived as less aligned with Wall Street interests,” McMillan said. “At a minimum, this introduces more uncertainty into economic policy and raises the chance of policy actions such as tariffs.”
He added: “Markets will likely react negatively to the increased uncertainty. They are also likely to take this as a signal that tariffs are indeed coming — quite possibly on more than just steel and aluminum. This could hurt business and investor confidence, which are two of the pillars holding up the markets.”
Keith Parker, the chief US equity strategist at UBS
“The trade pendulum is swinging and raising uncertainty,” Parker said. “Starting with solar panels and washing machines, followed by the announcement of broad tariffs on steel and aluminum, investors are assessing the prospect for retaliation and actions against China as NAFTA negotiations continue.”
Parker continued: “We view the public reactions of Cohn, select Republicans, corporates, and sovereigns together with the equity sell-off as acting as headwinds to protectionist momentum, particularly with midterm elections nine months away.”
Ethan Harris, the head of global economics research at Bank of America Merrill Lynch
“Cohn was part of the cohort of advisers within the Trump White House who supported a more traditional free-trade-oriented economic agenda,” Harris said. “With the departure of Cohn, the risk is that President Trump leans on White House officials who favor more protectionist economic policies, raising the probability that President Trump will go ahead with some form of tariffs on steel and aluminum imports.”
Isaac Boltansky, the director of policy research at Compass Point
“The clearest takeaway is that Cohn’s departure serves as an unambiguous affirmation of the trade protectionist ascendancy in the West Wing,” Boltansky said. “The steel and aluminum tariffs, coupled with Cohn’s departure, clearly suggest that President Trump’s aggressive posture on trade issues — including NAFTA and China — will only harden in the months ahead.”
He added: “Cohn has been viewed as a moderating force inside the White House, and his departure will undoubtedly exacerbate the market’s recent trepidation. With that being said, numerous clients noted that the magnitude of the market impact could be less than if Cohn departed during the tax-reform push. Our sense is that the brain drain at the White House, coupled with the acuteness of the trade-policy debate, will foster a risk-off bias.”
Charlie Ripley, a senior investment strategist for Allianz Investment Management
“Protectionist policies will act like a wet blanket on global trade, and markets continue to react negatively to these types of policies,” he said. “The bond market isn’t reacting as much to this news, as rates are mostly unchanged, but to the extent the landscape for global trade becomes less price competitive, we would expect further upward pressure on inflation and bond yields.”
Cesar Rojas, a global economist at Citigroup
“The resignation of NEC head Gary Cohn on March 6, a member of the president’s inner circle who had reservations about stepping up trade tariffs, might possibly increase Congress’ willingness to confront the president about his stiff tactics on international trade,” Rojas said.