The market dumped on Tuesday. For a good graphical representation, look at the three-day chart of the S&P 500 I keep on my desktop.
I like three day charts. If you want to know where you’re going, it’s good to know where you’ve been.
You can see a pretty radical change in price action from one day to the next.
What happened?
The job of financial journalism is to try to explain the day-to-day variations in the stock market. Oftentimes, there is nothing to report—lots of randomness. This time, on the other hand, stocks went down hard—so there must be a story behind it.
Is there?
As far as I can tell, the best explanation as to why stocks dumped on Tuesday is because it became increasingly unlikely that the “repeal and replace” of the Affordable Care Act would pass, because of a group of about 26 holdout Republican legislators.
For what it’s worth, I agree with the holdout legislators. The proposed law isn’t a repeal at all. It’s a collection of tweaks designed to get the original Obamacare working properly—along with a giant tax cut.
It is not the tax cut I disagree with. Tax cuts are great. But here’s the thing: if this doesn’t pass, the market doesn’t get the tax cut. And the market cares about tax cuts more.