"This is really about the fact that the market is pricing in too much certainty on a number of accounts," said Julian Emanuel, executive director of U.S. equity and derivatives strategy at UBS Securities. "Even if you got the positive vote, there's still the residual knowledge that the agenda will be difficult to get through the Senate."
While investors and strategists have said they do not see an immediate threat to the eight-year-old bull market, there is a risk of a 5-to-10 percent drop. Only a bear market -a 20 percent decline- would put an end to the bull.
"It looked like a mini tantrum," said David Kotok, chief investment officer of Cumberland Advisors. "Trump has made the House vote his own now so he has a lot at stake. My guess it will pass the House. If not, markets will be shocked and it won't be pleasant."
Michael Arone, chief investment strategist at the US SPDR Business at State Street Global Advisors in New York said that it the healthcare bill fails, "a correction of 5 percent is not unreasonable given how far we’ve come in such a short period of time."
Focus On Legislation
Investors are now more focused on the actual mechanics of the legislative process, said Brian Daingerfield, Macro Strategist at NatWest Markets.
"I noticed this was the first day (on Tuesday) I was getting inquiries about the healthcare law and the vote count," Daingerfield said. Wall Street views the healthcare vote "as a test of Trump's ability to unify the party," he said. "It has a symbolic significance."
After the healthcare bill, the market will look for movement on tax and infrastructure. The president has said he wants the health bill passed by the mid-April Easter holiday and a schedule from the administration aims for tax reform being passed by August. Only then will they begin to tackle infrastructure spending.
"U.S. equities have been priced for perfection since the start of 2017 and (Tuesday) was a rude reminder that the legislative process is imperfect on even its best days," said in a research note Nicholas Colas, chief market strategist at Convergex, a global brokerage company based in New York. (Additional reporting by Jennifer Ablan, Chuck Mikolajczak, Caroline Valetkevitch, Sinead Carew, Richard Leong, Lewis Krauskopf, Saqib Ahmed; Editing by David Gregorio)
This article was provided by Reuters.