Some Market Thoughts – No Room for Error

While we’re all trying to find a reason (or reasons) for the market pullback we have:

1. healthcare vote worries and tax reform legislation getting bogged down
2. continued weakness in the Russell 2000 and transportation index
3. financial stock weakness as the yield curve continues to flatten (the 3 month/5 yr yield spread is now 38 bps below the mid December peak and the smallest since mid November

I think maybe my #4 is most relevant today,

4. Kevin Brady’s comments on CNBC this morning before the market opened that “My sense is that border adjustability has become a given.

That it will be part of the final tax reform plan and now the discussions are how can it be designed in transition in a very positive way for importers.” Importers of course don’t see the possibility of “a very positive way” in any fashion and why the retail stocks today are getting hammered with XRT down 1.9% after falling by 1.5% yesterday:

 

I also don’t see how any form of it passes the Senate which means if DJT and the House push for it and it doesn’t get through the Senate, I’m not aware or familiar with any Plan B out there. Which then would push further out the possibility of major tax reform.

Either way, the amazing run the market has had since the election left no room for error, delay or issues of any kind.