Washington's got Wall Street's undivided attention.
The S&P 500 Index sought to rebound from its worst selloff of the Trump era, while demand for traditional safe havens like Treasuries and the yen remained robust as Congress scrambled to win support for a Republican health-care bill.
At stake for the markets is a decision that could hammer cracks into a historic rally or vindicate optimism on President Donald Trump's ability to push through his pro-growth policies. It's a crucial test for $2.2 trillion that's been added to U.S. stocks since the election, and the concern is palpable.
While no one would question the sturdy economy's role in the market's recent gains, there's a swath of investors who want a year of pro-growth campaign promises to start becoming law. As the health-care vote looms later Thursday, strategists and investors are gearing for the prospect of the bill's failure -- and a scenario where continued gridlock could complicate the timing of promised tax reform and deregulation.
As Fundstrat's Tom Lee explained, "it's an expensive and baffling market," prepared to pass judgment on the credibility of the Republican's agenda.
Here's what Wall Street had to say about how smart money is gearing up for the vote, and what they're expecting once the final tallies are counted.
Matt Maley, equity strategist at Miller Tabak & Co. LLC in New York:
"For now, the move is to put on some hedges and continue to play some of the defensives. If the thing gets passed, we might get a little pop, but that will reverse quickly. This process should be telling us that it's going to be tougher for President Trump to get passed what he wants, and thus, policy is going to take longer to get implemented than what the markets are pricing in right now. Any bounce from a positive vote or them trying to shift toward a tax cut will be an opportunity to take some profits and hedge some positions because I don't think it'll last long."
Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc.:
"I think the market will rally a bit if this thing gets done, which is my assumption. The problem is that people will worry about passage in the senate. The equity market will like passage of it occurs, but I don't think it's necessarily going to be off to the races just because dealing with the senate will keep people nervous and view it as one hurdle having been crossed
"If it doesn't pass it's definitely short term very negative for equities and bullish for fixed income."
Ulf Lindahl, chief executive officer of A.G. Bisset Associates, who manages more than $1-billion from Norwalk, Conn:
"I expect the health care bill to pass. Whether one is in support or in opposition, it is likely to create uncertainty for weeks and months to come that is likely to impact consumers who are concerned about losing their health care. They will become more reluctant to spend on big ticket items such a new cars and appliances, which could weigh on the equity market, which is now vulnerable to a short-term downward correction. A break in the market would be seen as evaporating confidence in Trump and, by extension, in the belief that the dollar will rise on his policies."
John Carey, a Boston-based fund manager at Pioneer Investment Management, which oversees about $230 billion:
"I'm watching and waiting to see what actually emerges before making any decisions with regard to individual stocks or portions of the health-care industry. The biggest uncertainties are probably with respect to health insurance providers, as well as drug companies and all the different providers. It's a major part of the economy and an important contributor to quality of life, so I hope whatever they do is carefully considered at some point and reviewed for all the possible consequences."
Bob Savage, chief executive officer of the hedge fund CCTrack Solutions LLC in New York:
"Yes this is an important first test of the president. It implies a timeline issue. But in the big picture, no it's not that important. The dollar is down because interest rates aren't higher, and the rates aren't higher because of data, and the Fed forecast doesn't expect anything from fiscal stimulus.
This is going to be a volatile event, and there'll be opportunity to put money to work. The knee-jerk reaction would be higher dollar if the bill passes and weaker dollar if it doesn't. It's not going to be that simple, because it'll depend on what changes have been made to get it passed. And if it passes, whether it's going to get through the Senate. It's a long and arduous process, watching sausage being made. "
Quincy Krosby, a market strategist at Prudential Financial Inc., which oversees about $1.3 trillion:
"As long as it seems like they're constructive and closing the gap on the vote, the market can hold up. But that doesn't mean you're not going to hedge your bets. This has to go to the senate, and that takes time. This is why you're hearing more analysts suggesting buying outside of the U.S. As long as the dollar stays off a bit, you're seeing buying in emerging markets and Europe."