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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 12:21 PM
Updated: Mar 7, 2018 12:21 PM

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."

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 751242

Reported Deaths: 13795
CountyCasesDeaths
Marion1032931788
Lake556911009
Allen41692692
St. Joseph36990565
Hamilton36588417
Elkhart29398461
Tippecanoe22901226
Vanderburgh22556400
Porter19356325
Johnson18471389
Hendricks17682317
Clark13226195
Madison13149344
Vigo12614253
LaPorte12419221
Monroe12207176
Delaware10966198
Howard10321225
Kosciusko9630121
Hancock8576146
Bartholomew8169157
Warrick7860156
Floyd7811180
Grant7242179
Wayne7162201
Boone6966103
Morgan6761141
Dubois6218118
Marshall6209116
Cass6016110
Henry5900110
Dearborn589878
Noble581488
Jackson509076
Shelby501496
Lawrence4742122
Gibson444894
Clinton442355
Harrison441875
DeKalb439885
Montgomery438090
Whitley406543
Huntington402681
Steuben400159
Miami395269
Jasper388054
Knox375991
Putnam372960
Wabash361983
Ripley347170
Adams345555
Jefferson335886
White331953
Daviess3033100
Wells295281
Decatur289992
Greene286885
Fayette284864
Posey273835
LaGrange273072
Scott270156
Clay267148
Washington246036
Randolph244783
Jennings235349
Spencer234531
Starke228058
Fountain220948
Sullivan214643
Owen211858
Fulton202942
Jay200932
Carroll193620
Orange188255
Perry187237
Rush175926
Vermillion174844
Franklin170335
Tipton166246
Parke149416
Pike138234
Blackford136232
Pulaski120647
Newton113936
Brown104243
Crawford102516
Benton101714
Martin91715
Warren84015
Switzerland8148
Union72810
Ohio57911
Unassigned0420

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1108736

Reported Deaths: 20166
CountyCasesDeaths
Franklin1287201467
Cuyahoga1157922211
Hamilton813971250
Montgomery525481043
Summit484271001
Lucas43353820
Butler39013606
Stark33332929
Lorain25672505
Warren24591303
Mahoning22370603
Lake21207388
Clermont20117253
Delaware18852136
Licking16662222
Fairfield16574204
Trumbull16548482
Medina15610271
Greene15281248
Clark14237306
Wood13292200
Portage13251215
Allen11913239
Richland11605211
Miami10849225
Wayne9141223
Columbiana9032230
Muskingum8906135
Pickaway8663122
Tuscarawas8649250
Marion8642138
Erie8056165
Ashtabula7160179
Hancock6998132
Ross6944161
Geauga6838151
Scioto6534106
Belmont6157174
Union584549
Lawrence5731102
Jefferson5678158
Huron5546122
Sandusky5442126
Darke5420129
Seneca5348128
Washington5319109
Athens523960
Auglaize502187
Mercer487385
Shelby476895
Knox4571112
Madison444266
Ashland435797
Putnam4336103
Defiance432399
Fulton432074
Crawford4037110
Brown402461
Logan387677
Preble3855105
Clinton379166
Ottawa373681
Highland359665
Williams348278
Champaign344759
Guernsey324953
Jackson318254
Perry297350
Morrow291840
Fayette285450
Hardin275265
Henry273467
Holmes2701101
Coshocton269060
Van Wert247264
Adams243256
Pike242835
Gallia240650
Wyandot234556
Hocking220563
Carroll197348
Paulding176542
Meigs148440
Monroe136344
Noble136239
Harrison114138
Morgan109624
Vinton85517
Unassigned03
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