JPM Warns Investors Are Clueless How Difficult Passage Of Trump's Agenda Will Be

Some early morning thoughts from JPM's Adam Crisafulli

Market update – the narrative is still focused on growth/earnings and politics and there was plenty of news on both subjects overnight. The GOP retreat kicked off Wed night in Philadelphia and the Republican leadership outlined its agenda for the next 200 days – ACA repeal/replace and tax reform will be priorities (not infrastructure spending). Also it’s important to make a distinction between the House and Senate – Ryan will have an easier pathway towards passing legislation through the House than McConnell will in the Senate (Ryan can easily move ACA repeal/replace and his tax blueprint while McConnell won’t have nearly as much flexibility in the Senate). It remains the case that investors aren’t paying enough attention to the logistical, ideological, and fiscal constraints facing Trump/Ryan/McConnell as they look to move the agenda through Congress (and there still doesn’t seem to be enough appreciation for how enormously contentious and complicated healthcare repeal/replace will wind up being). Trump is due to address the GOP retreat Thurs 1/26 around midday. On the earnings front results Wed night/Thurs morning were generally positive and tech in particular is having a very solid season.

US macro update - the gap between expectations/enthusiasm and reality is large (and seems to be growing by the day) but 1) markets may not “care” until the end of the summer (i.e. investors may give the new WH the benefit of the doubt until Aug or Sept) and 2) the tape may not really “need” material action from Washington (the nominal growth improvement predated 11/8 by several months and if the present eco/earnings trends can persist the SPX should be able to do ~$127-130 for ’17 and ~$135-137 for ’18 w/o any of the Trump/Ryan “Big 3”).