Another Reason To Be Happy: “No Policy Is Better Than Bad Policy”

Earlier today, I brought you the latest from BofAML on the outlook for the reflation narrative now that Donald Trump and Paul Ryan have given up on “repeal and replace.”

By most accounts, the failure of the GOP bill marked a setback for tax reform and really, for the Trump agenda as a whole.

But BofA contends that contrary to popular belief, it’s better that we just get on with things -“repeal and replace” or no “repeal and replace.” To wit:

In our view, the failure to push through healthcare reform by the GOP last week was possibly the best thing to happen to Trump trades since the inauguration. We believe the probability of tax reform getting done this year has, if anything, gone up and more options have become politically viable after the last two weeks.

Well, in a testament to the (maybe) veracity of that claim, Bloomberg contributor Cameron Crise is out with his own take. The thesis: no policy is better than bad policy and besides, the trades that were tethered to this were already unwound. 

Via Bloomberg

While there has been plenty of ink spilled over the U.S. health-care issue, this week provides an object lesson to American readers of what real political risk looks like.

  • In South Africa, Jacob Zuma has managed to undermine the currency, the bond market and quite possibly the credit rating in one fell swoop, with reports he has talked about firing Finance Minister Pravin Gordhan.
  • In the U.K., tomorrow sees the triggering of Article 50 and the commencement of Brexit proper. While the economy and the equity market have thus far been pretty resilient, sterling has taken the decision to leave the EU as a spectacular own goal.
  • When it comes to the intersection of politics and markets, it certainly seems as if errors of commission are more serious than errors of omission; in other words, bad policy is worse than no policy at all. Indeed, the past few decades are replete with examples of gridlock and government inactivity being a fertile environment for U.S. financial markets.
  • While there may be ample to reasons to believe that U.S. equities are in the process of topping, at least relative to the rest of the world, it may be difficult to argue that disappointment over tax reform is one them.
  • Having outperformed the broad market immediately after the election, high tax-rate companies have given back all of those gains and have now underperformed.


  • That suggests that there is relatively little in the price and thus, despite hand-wringing about the topic, probably little scope for near- term disappointment on this front.


Along these same lines…



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