'Wall Street just lost its security blanket' - Here's what experts are saying about Gary Cohn's exit from the White House
- Reports of top White House economic advisor Gary Cohn's departure sparked immediate selling in global equity markets.
- Experts across Wall Street have weighed in with their thoughts.
Wall Street got another reminder of how volatile the White House is on Tuesday evening amid reports Gary Cohn will step down as President Donald Trump's top economic adviser.
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 Wednesday morning. The S&P 500 and Dow Jones industrial average remained firmly lower as of mid-day.
The broad-based weakness signals investors are worried Trump's recent protectionist behavior - most notably his proposed tariffs on steel and aluminum - will spur a trade war. Concerns include possible retaliation from other countries, as well as a negative economic impact that could wind up costing the US economy hundreds of thousands of jobs.
Trump reportedly pushed forward with his tariff announcement last week despite protests from Cohn. There has also been speculation the Trump administration may be close to clamping down on Chinese investments in the US and imposing tariffs there.
The Cohn report and 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 round-up of all the most insightful commentary:
Chris Krueger, a strategist at Cowen Washington Research Group
"Wall Street just lost its security blanket ... 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."
"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, chief investment officer for Commonwealth Financial Network, which oversees $156 billion
Cohn was "seen as the voice of economic stability and a spokesperson for financial markets. His resignation leaves the president with a set of economic advisors largely seen as outside of the mainstream, or at least perceived as less aligned with Wall Street interests. At a minimum, this introduces more uncertainty into economic policy and raises the chance of policy actions such as tariffs."
"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, chief US equity strategist at UBS
"The trade pendulum is swinging and raising uncertainty. 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."
"We view the public reactions of Cohn, select Republicans, corporates and sovereigns together with the equity selloff as acting as headwinds to protectionist momentum, particularly with midterm elections nine months away."
Ethan Harris, 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. 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, 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. 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."
"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, 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. 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, 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."