Healthcare Reform Bill Fails Again

President Trump’s agenda suffered another blow last night when two Republican senators announced they will not support the revised proposed plan to repeal and replace Obamacare.  One of the two happens to be Utah’s Senator Mike Lee who feels the plan does not go far enough from separating the US government from the obligations of providing healthcare to Americans. With this loss, Republicans lack the votes needed to pass their plan. Although the battle could be attempted at some point soon, it appears to be dead for now. Since this was a significant driver of higher stock prices post-election, this could slow the pace of stock growth in the near term. That’s great news for the bond market, which could not have the strength needed to make a decisive break above its 200-day moving average.

A look at the bond charts show what is called a “golden Cross.”  This is where the 50-day moving average crosses over the 200 DMA. It’s typically a bullish indicator which could point to an improved bond market ahead. Given the timing of the healthcare reform debacle, this may add the steam needed for bond prices to move higher. We will have to wait and see.

The failure of passing healthcare reform once again puts Trump’s overall fiscal policy changes in jeopardy. With the proposed tax reform bill heavily tied into the successful passing of the healthcare reform plan, we could see current tax rates stay in place. Once again, this should drive stock prices lower and help soften mortgage interest rates.

With mortgage bonds improving, you can float if you are able to closely watch the markets. If bonds make a strong break above their 200-day moving average, we will see improved pricing. However, given the difficulty associated with making such a move, we will likely see bond prices weaken. Therefore, if you can’t watch the markets, the safe play will be to lock.