US: Political drama to continue in Washington - BBH

Analysts at BBH explain that the political drama in Washington continues with many business leaders who had been on advisory panels quit over a disagreement with how the President handled a domestic terrorist incident.  

Key Quotes

“In addition to the two panel that the White House subsequently disbanded, reports indicate that more than half the members of the 15-member Digital Economy Board of Advisers (initially set up by Obama).”

“Like all modern political movements and parties, Trump's Administration reflects a coalition.  Until now many national business leaders were willing to work with him, even if they were not in full agreement because the economic agenda of deregulation, tax reform, and infrastructure spending was something they could get behind.  The prospects have dimmed, given the mess made of healthcare reform and intra-party conflict within the Republican Party, which is trying to exploit its majority rather than make bipartisan deals.  One needs not be Machiavelli to see that the perceived reputation risk had increased.”

“This may be one of the most significant blows to the Trump Administration.  And compounding the fracture, was the strong message by Republican Senator Corker, an early Trump supporter.  We have tended to downplay the low-level of support in the national polls because drilling down showed his base was intact.  Recent events suggest his base is cracking.  Controversial adviser Bannon was dismissed before the weekend in what seemed like a sacrificial gesture or an indulgence.’

“For investors, a key is whether the voice of the business camp of the Trump's coalition, personified in Cohn, is stronger or weaker.  Rumors of his resignation helped trigger, alongside the Fed's upgraded concern about asset prices, the second largest sell-off in the S&P 500 this year on August 17. Investors may remain sensitive to the shifting balance of influence within Trump's Administration.”

“At the same time, it is just another part of the drama and does nothing to find sufficient common ground between the interests represented by the Freedom Caucus and the more moderate Tuesday Group.  A weakened president and weak Congress (ineffective majority) do not lend themselves to kind of deal making that is necessary for the normal function of government and the innovations needed to keep the economy competitive.”