When Donald Trump won the race for the White House last year, markets rallied. The so-called “Trump trade” rested on the hope that the US president would deliver business friendly reforms that would boost growth. This was a bit of a misnomer: what executives and investors have really been betting on for most of this year is a “Cohn trade”.
…The question that investors and executives are asking is whether that “Cohn trade” still works. It certainly looks like a higher risk bet. Never mind the fact that Mr Cohn and John Kelly, the president’s chief of staff, failed to stop Mr Trump from making his inflammatory comments this week about the Charlottesville protests. What is most telling is that this disaster happened at the very moment that Mr Cohn’s star was supposed to shine.
…This does not necessarily mean that all the investor optimism around the Cohn trade has disappeared. Stock markets are still flushed with oodles of central bank liquidity and boosted by moderate economic growth. And one important detail about the Cohn-cum-Trump trade that is often forgotten is that markets did not merely rally because business hoped reforms would get done. Executives were also excited about what might not occur under Mr Trump — Barack Obama-style regulatory creep.