Investors look beyond US President Donald Trump's healthcare travails to work out tax cut obstacles

Jasper Jolly
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Paul Ryan, House Leaders Hold Press Conference On American Health Care Act
Paul Ryan has been under pressure to get the American Health Care Act to a vote (Source: Getty)

US President Donald Trump's determination to put his healthcare reforms behind him – win or lose – has boosted markets hungry for him to start on his next priority: tax cuts.

The S&P 500 rose by six points at the start of Friday trading after Trump put forward an ultimatum to force through a vote on the health plans.

Trump has struggled to get his American Health Care Act off the ground, with opposition from both sides of his Republican party.

Read more: Why are UK stock markets falling now? A guide to the Trump trade

However, he has persuaded the speaker of the House of Representatives, Paul Ryan, to hold a vote by the end of today even if he is unsure of passing his healthcare bill, according to Reuters.

While the details of the plan are a vitally important domestic issue for the US, with millions of people set to lose health insurance coverage, markets are more concerned about the President’s ability to deliver promised tax cuts.

The repeal and replacement of the Affordable Care Act put in place by former President Barack Obama was one of Trump’s central promises during the election campaign.

Trump’s political struggles with both moderates and conservatives spooked investors earlier in the week, who pulled money out of equities at the fastest rate in more than 100 days as fears abound about Trump’s signature tax reform and infrastructure policies.

Read more: Trump has a big day for healthcare! Working hard! But he's hit a speed bump

The S&P 500 fell by 1.24 per cent on Tuesday as the political obstacles facing the President became clearer.

Outflows from US equity funds measured by EPFR rose to a 38-week high in the week to Wednesday as investors retraced some of their steps in backing Trump’s fiscal boost.

The election of Trump led to a massive sell-off of bonds as investors anticipated inflationary policies, but US bond funds rebounded in the last week.

Meanwhile, emerging market equity funds have been one of the biggest losers in the rush to gain exposure to Trump’s growth-focused policies, but in the week to Wednesday they recorded their biggest inflow in over seven months.

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