10Y dollar S&P 500

As White House Denies Gary Cohn ‘Rumor’, Market Gets ‘Crash’ Preview

"I don't want to be an alarmist"...

So, just to be clear, you don’t need to be political scientist or a particularly keen market observer to know that if Gary Cohn quits on Trump, risk assets are likely to sell off, the dollar is likely to plunge, and yields are likely to fall precipitously.

I mean come on folks, we’re talking about driving a stake through the heart of tax reform and throwing the future of the Fed into doubt here.

Following reports that Cohn was extremely upset after Tuesday’s Trump meltdown, the Street was already on edge.

Everyone “is focused intently on how U.S. National Economic Council Director Gary Cohn will react to President Donald Trump’s recent statements after the events in Charlottesville, because of tax reform in the near-term and the Fed chairmanship in the medium-term,” Compass Point’s Isaac Boltansky wrote in an e-mail to Bloomberg yesterday.

Those worries came to a head this morning, when a rumor that Axios swears is “100% false” started circulating that Cohn had resigned. The White House has now denied the “rumor” with this not-entirely-convincing statement:

  • Gary Cohn plans to remain in his position as NEC Director

Well, if the administration needed a preview of what to expect from Trump’s beloved stock market rally in the event Cohn does pack his bags, it got one:


So that’s S&P futs, Nasdaq futs, USDJPY, 10Y yields, and the VIX in the bottom pane.

“Do you see what happens Larry?!”


Earlier today, Yale’s Jeffrey Sonnenfeld told CNBC the following about Cohn:

I don’t want to be an alarmist, but there is a lot of faith that he is going to help carry through the tax reform that people are looking for.

I think if he steps away, it would crash the markets.

So there’s that.

As you ponder all of this, here’s a full wrap of analyst opinions on what Trump’s Tuesday rant might mean going forward….

COWEN (Jaret Seiberg)

  • Trump’s Charlottesville troubles represent “macro threat” to financials, risking big issues like tax reform, and making it harder to attract business executives to Trump’s government
  • Question for the market is whether business pragmatists will abandon or refuse to work for Trump’s White House, particularly what would cause Cohn to quit
    • Cowen’s thesis since Cohn joined Team Trump has been that the market would look past “tweeting and theatrics” as long as there was confidence pragmatic business people were influencing policy; premature Cohn departure would remove financials’ “safety net” and boost odds conservatives like Thomas Hoenig and Mark Calabria gain more power, reigniting issues like 10% capital requirement, big banks size limits
    • Base case remains that Cohn stays through Jan. 20; sees Cohn Fed chair nomination more likely (as White House exit strategy)
  • Regulatory changes — like Volcker Rule reform, supplemental leverage ratio, more accommodating regime for IPOs, more moderate CFPB — likely still on track


  • Every time it seems like “the wheels are about to come off” economic agenda, (as per lingering Russia investigation), returns to “simple equation” that Trump isn’t driving the train when it comes to taxes, pro-growth policies
  • Republican leaders in Congress “know they made a Faustian bargain,” see Trump as little more than a “vessel” with pen in hand to sign legislation
    • Notes tax reform agenda pre-dates Trump presidency; Republicans face potential losses in 2018 without big win; CEOs leaving councils was cost-free move driven by PR considerations, not disagreement with policy agenda
  • Sees Stephen Bannoninterview with American Prospect as possibly bringing Bannon closer to Trump; notes Bannon contrasted his influence on policy with Cohn’s and referred to Cohn as beholden to “Goldman Sachs lobbying”; sees Cohn as likely to prefer to “stick things out” to prevent Bannonites from exerting more influence
    • Cohn’s continued presence would be positive sign for investors

BMO (Ian Lyngen, Aaron Kohli)

  • Implication that broader pro-business agenda is in jeopardy as administration’s ties to business community suffer setback with councils’ disbandment “seems a bit dramatic,” though there’s risk of undermining perceived credibility/effectiveness of any major deregulation efforts
  • Focus turns to Gary Cohn; while resignation would hit Trump’s tax reform plans, there’s no indication he might be stepping down
  • Doesn’t want to make too much of chatter, other than “simply a nod” to risk as market enters relatively-quiet period for economic data, policy events, with perhaps the exception of Jackson Hole

EVERCORE ISI (Terry Haines)

  • Disbanding business councils doesn’t affect likelihood of tax legislation; stays at 50% odds
  • Business community,trade associations will keep pushing hard for tax reform; as long as NEC’s Cohn, Treasury’s Mnuchin remain on point for Trump, administration will continue to be competent congressional partner on tax legislation; sees no sign either will leave
  • Congressional Republicans are focusing on tax reform because it’s long been top priority, won’t rely on Trump for success; continued Trump travails plus ACA failure may further steel congressional leaders’ resolve to accomplish tax reform

CAPITAL ALPHA (Charles Gabriel)

  • Doubts Cohn or other key administration officials will resign; doesn’t view Hill Republicans, top CEOs distancing from Trump ominously as Trump was unlikely to be major player as Congress engages in “the art of the achievable, rather than the wishes of supply-side evangelists”
    • Sees market as way ahead in adjusting to this
  • Still thinks tax reform will happen, because it’s even more TBTF after healthcare disaster, it’s in party’s DNA, there’s enough low-hanging fruit that it’s too worthwhile to pass up
  • CEOs leaving councils may be helpful if shields tax efforts from attacks they’re corporate pay-offs; at the same time, the White House is near isolation which, given Trump’s refusal to be ignored, may elevate tweet risk just as Republicans enter “excruciatingly-risky gauntlet” of having to fund the government, extend debt ceiling by October, pass budget resolution

COWEN (Chris Krueger)

  • Government shutdown on October 1 makes sense for an increasingly-isolated Trump
  • Notes there are 12 legislative days in September, Trump has typed more Twitter attacks against Republican Senators than vs the 10 Democratic Senators running for re-election in Trump-won states; Trump may look to go “full scorched-earth,” as shutting down federal government is the definition of draining the swamp
  • Base case: 2-week October shutdown; expects debt ceiling “X date” to push to mid-October with 4Q inflows; sees debt ceiling are “action-forcing event” to re-open government, just like in 2013

9 comments on “As White House Denies Gary Cohn ‘Rumor’, Market Gets ‘Crash’ Preview

  1. Ah, but imagine the dip-buying opportunity the day AFTER he resigns!

  2. “Guilty by association” – has a long history of ruining the most sagely wishful thinking. These people Cohn and others in their current positions are at risk of being painted with the same sticky, tarry and odious neo-Nazi brush as Trump has so deliberately covered himself with. They be skilled financial types, but their political careers and resources will equal zero – if they stay with the stinking/sinking Trump Administration.

    Think of it as asking the First Mate, the Bosun, the Steward and the Cabin Boy to stand with the Captain – while he scuttles his ship and goes down with it while self-immolating – at the dock with all the media in the world up front and watching. It isn’t at all unreasonable to think that their survival instincts aren’t far, far, stronger than their neo-Nazi Trump loyalties. Trump isn’t finished destroying any remnants of any credibility anyone theorized he might have. If his command isn’t assumed by someone sane – he will eventually take us all down with him – men, women and children a like. He’s just that fucking crazy.

  3. Dan Gabella

    Thumbs up, D. Dugger!

  4. The sober analysis in those notes seems to conflict quite a bit with your penchant for dramatics.

  5. Anonymous

    How can one stand idly by while your boss equivocates about neo-nazis and white supremacists? Especially if you are a member of a minority like Cohn. But then you put the weight of a possible market crash on his shoulders and he must feel a great sense of duty. I just keep thinking about the expression on John Kelly’s face while trump went off the rails on Tuesday. It is exactly how Cohn, and anyone else with a little decency and intelligence remaining in the administration, must be feeling.

  6. THANKS for doing what you do.
    Without your POV I would be flying blind.
    ..and another shout out to the comments section!

    • Anonymous

      Shouting back – Hey! I assume VietVet signifies you served in Vietnam war? If so, Thank You!

      – Murphy

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