Unease has set in on Wall Street in light of Republicans' bungled push to repeal and replace Obamacare and growing questions over the president's ability to accomplish what was expected to be a market-driving agenda.
U.S. stocks plunged on Monday while gold and the Japanese yen gained as investors weighed a growing unlikelihood of sweeping tax reform in the near future and instead stared down the possibility of a government shutdown next month. "Trump Trade" trended on Twitter, and not in a positive light.
"This past week we found out that the world is still a dangerous place and getting deals done in Washington is tougher than most boardrooms," wrote Jefferies analysts in a Sunday note.
The last few days have been rough for Congressional Republicans and President Trump. Besides the failed efforts on health care reform, last week also saw FBI Director James Comey confirm that his agency is investigating ties between the Trump campaign and Russia.
The administration will try this week to reset the narrative. The president plans to unveil a new White House office on Monday headed by his son-in-law, Jared Kushner, to overhaul the federal bureaucracy and fulfill campaign promises, according to the Washington Post. Trump will sign a sweeping executive order on Tuesday rolling back much of the Obama administration's efforts on climate change, according to Bloomberg.
Still, Wall Street remains wary of what's to come, especially as tax reform, the element driving the post-election rally, appears farther out on the horizon than ever.
"Debate over the Republican health care plan, the American Health Care Act, sparked investor concern about the probability and timing of anticipated policy tailwinds to earnings. Our Washington, D.C. economist expects legislation that lowers the corporate tax rate and makes incremental tax reforms to be enacted by late 2017 or early 2018, meaning corporate earnings will likely not be affected any earlier than next year," wrote Goldman Sachs analysts.
"It appears the market did fall in love with the President's pro-growth policies immediately following the election, with more domestically-oriented companies and those with above average tax rates meaningfully outperforming. However, the market quickly lost interest in these names following the initial love affair," wrote RBC Capital Markets analysts.
The S&P 500 fell 1.5% last week, marking its second down week in nine weeks and its worst week since November. The CBOE Volatility Index that measures volatility spiked to 14.16 on Friday, marking its highest point of the year, albeit still historically low, noted Deutsche Bank's Jim Reid.
While Trump and Speaker of the House Paul Ryan have attempted to put on a united public front on their agenda moving forward, cracks in the GOP coalition are hard to ignore.
House Freedom Caucus chairman Mark Meadows on Sunday said his group could support a tax reform plan that is not revenue neutral, a direct contradiction with House Republicans' tax blueprint that includes the border adjustment tax and eliminates interest deductibility to pay for tax cuts. The House Freedom Caucus is the group that tanked health care reform.
"The risk now is that the health failure will make the GOP Congress even less cohesive and less likely to follow its leaders," the Wall Street Journal warned in a Sunday editorial. "The other big risk is that Republicans will now settle for a modest tax cut without a fundamental reform that clears out special-interest favors."
WSJ ran a story Monday that a market correction -- namely, a 10% pullback from March 1 highs -- might not be so bad. "It's like dental work," Michael Farr, president of the money management firm Farr, Miller & Washington, told the publication. "You dread it. You don't want to get it. But you're glad when it's over and you feel better."
But investors feeling good about a stock market pullback might be wishful thinking. Before anyone tackles tax reform, they have another big fish to fry: a potential government shutdown. The continuing resolution currently funding the government expires April 28, and the White House and Congress will have to strike a deal to avoid a market-rattling government shutdown.
Senate Minority Leader Chuck Schumer told NBC's Chuck Todd on Sunday that he does not want to shut down the government but indicated he will be a tough negotiator -- and doesn't want to deal with Trump.
"If President Trump would stay out of it, because his budget, done by Mulvaney is so far to the right, slashing middle class things like education, like transportation, like medical research, like clean air and clean water, no, we can't work," he said. "But left alone, McConnell, Ryan, and the Democrats could come to an agreement."
Wall Street will most certainly be watching.