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Why Wall Street loved Gary Cohn inside the White House

Gary Cohn didn't just speak Wall Street's language. He served as an island of calm and a voice of reason inside a Whi...

Posted: Mar 7, 2018 11:21 AM
Updated: Mar 7, 2018 11:21 AM

Gary Cohn didn't just speak Wall Street's language. He served as an island of calm and a voice of reason inside a White House often gripped by chaos.

Cohn's abrupt resignation as President Trump's top economic adviser immediately spooked investors who had long been comforted by his market-friendly influence in the West Wing.

It's not just that Cohn's exit clears the way for tariffs that markets fear could spark a trade war. It's the view that Trump no longer has a powerful angel on his shoulder shouting down dangerous policy ideas.

"Wall Street just lost its security blanket," Chris Krueger, managing director of the Cowen Washington Research Group, wrote in a report. Krueger said he couldn't think of a replacement who will "give Wall Street as much comfort as Cohn."

Cohn's Goldman Sachs pedigree and free-market beliefs prevented investors from losing sleep over the fire-and-brimstone style of former adviser Steve Bannon and protectionist tendencies of National Trade Council Director Peter Navarro and Commerce Secretary Wilbur Ross.

Cohn is credited with quarterbacking the tax overhaul through Congress, a law that Wall Street loves and helped send the stock market surging earlier this year. He pushed for free trade, infrastructure spending and deregulation. Cohn criticized Trump's initial failure to condemn neo-Nazis, tried to get the administration to stay in the Paris climate accord and even admitted coal doesn't make "much sense anymore."

Related: Wilbur Ross: We'll do tariffs 'without blowing up the world'

The loss of the "most market-friendly character in the administration" is raising concerns "in a world where White House policy is often seemingly influenced by whoever last spoke to the President," Bespoke Investment Group analysts wrote in a report.

The "exit of Cohn is certainly a reduced circuit breaker against policy missteps of all kinds," the firm wrote.

Peter Boockvar, chief investment officer at Bleakley Advisory Group, said Cohn served as a "firewall against dumb and damaging economic initiatives" -- such as tariffs.

Now that Cohn is gone, the chances of Trump becoming more aggressive on trade has increased. That includes imposing tariffs on steel and aluminum imports without exclusions for allies, such as Canada and Mexico. The White House said it expects to make an announcement on tariffs at the end of this week.

Beyond tariffs, emboldened trade hawks in the administration may now push Trump to aggressively crack down on China's intellectual property theft. Given the lack of progress on talks to renegotiate NAFTA, Trump could even carry out his repeated threat to withdraw from the North American trade alliance.

Related: Cohn's exit strokes fears that Trump will fight a trade war

Some think the focus on Cohn is overdone and the impact to the stock market will be brief. Indeed, the Dow has rebounded from the losses signaled Tuesday night. And Cohn's exit doesn't take away from the economic and earnings strength that has lifted stocks over the past several years.

"The economy is bigger than one guy, even if that guy used to be the No. 2 at Goldman Sachs," Michael Block, chief market strategist at Rhino Trading Partners, wrote in a report. "And it's not like Cohn had Trump's ear."

Trump could quickly reassure nervous investors by picking a replacement for Cohn who has a free trade and pro-business track record. Analysts say candidates include Navarro, former Fed official Kevin Warsh and CNBC commentator Larry Kudlow, a critic of the tariff plans.

White House press secretary Sarah Sanders told reporters on Wednesday that Trump will make a "good pick that will help him further building a strong economy and creating jobs."

The longer run concern among some analysts is about the overall direction of Trump's economic agenda.

For instance, ING currency strategist Viraj Patel noted that just months after enacting a tax cut that could increase trade deficits, Trump is now moving to tackle a "self-inflicted" trade deficit.

"It is this lack of US economic policy cohesion that is fueling a loss of confidence in the long-run trajectory of the US economy," Patel wrote in a report. He said history shows a "big policy regime shift (and a big character)" is needed to restore confidence."

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 314509

Reported Deaths: 7247
CountyCasesDeaths
DeSoto21626259
Hinds20359415
Harrison17934309
Rankin13634278
Jackson13447246
Madison10099217
Lee9980174
Jones8381163
Forrest7683152
Lauderdale7191241
Lowndes6401147
Lamar623086
Lafayette6200118
Washington5339134
Bolivar4802132
Oktibbeha462798
Panola4588107
Pearl River4512146
Marshall4443103
Warren4393121
Pontotoc420772
Monroe4113133
Union411076
Neshoba4031176
Lincoln3968110
Hancock379386
Leflore3497125
Sunflower336090
Tate334084
Pike3325105
Scott315973
Alcorn313368
Yazoo311669
Itawamba300477
Copiah297065
Coahoma295479
Simpson295288
Tippah288768
Adams286882
Prentiss279760
Marion269280
Leake268373
Wayne262641
Grenada261487
Covington259681
George248048
Newton246861
Winston227281
Tishomingo226967
Jasper221148
Attala214473
Chickasaw207857
Holmes189173
Clay185454
Stone182833
Tallahatchie178841
Clarke178080
Calhoun170832
Yalobusha164338
Smith162434
Walthall133945
Greene130633
Lawrence128624
Montgomery126942
Noxubee126734
Perry126338
Amite123142
Carroll121829
Webster114532
Jefferson Davis107133
Tunica105726
Claiborne102430
Benton99525
Humphreys96733
Kemper95828
Franklin83823
Quitman80916
Choctaw76418
Wilkinson67331
Jefferson65728
Sharkey50217
Issaquena1686
Unassigned00

Alabama Coronavirus Cases

Cases: 532895

Reported Deaths: 11001
CountyCasesDeaths
Jefferson771431528
Mobile41089808
Madison34837505
Tuscaloosa25810454
Montgomery24355588
Shelby23730249
Baldwin21191309
Lee15892171
Calhoun14522316
Morgan14324279
Etowah13861353
Marshall12250223
Houston10581281
Elmore10060205
Limestone9986151
Cullman9705194
St. Clair9702243
Lauderdale9441242
DeKalb8846187
Talladega8255176
Walker7246277
Autauga6938108
Jackson6815112
Blount6694137
Colbert6310134
Coffee5524119
Dale4850111
Russell443238
Chilton4308112
Franklin426282
Covington4136118
Tallapoosa4039152
Escambia393977
Chambers3578123
Dallas3557152
Clarke351161
Marion3130101
Pike311377
Lawrence300798
Winston275673
Bibb261564
Geneva251477
Marengo249664
Pickens234761
Barbour231756
Hale223277
Butler216469
Fayette212562
Henry189044
Cherokee184745
Randolph181742
Monroe178040
Washington167639
Macon159950
Clay156857
Crenshaw152757
Cleburne149141
Lamar142935
Lowndes139053
Wilcox127130
Bullock122841
Conecuh110629
Coosa107928
Perry107826
Sumter104832
Greene92534
Choctaw61124
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