Posted on March 7, 2018 5:38 pm

Why The Cohn Resignation Doesn’t Matter To Stocks

Late yesterday afternoon, President Trump’s Chief Economic Advisor Gary Cohn announced his resignation.

Index futures gapped down when the session opened. The Dow was down over 400 points at its low.

People on StockTwits and Twitter were saying the world was ending. Even members of my trading room were calling this the beginning of the end.

That this was the crash.

Well, maybe it is. Maybe enough panic will be generated that we keep selling off. Futures have gone red to green and back to red now.

But here’s the thing about the Cohn Resignation….

It doesn’t matter to the markets.

What is going on, in my opinion, is the market overreacting. It’s the big money getting bigger by letting retail burn cash as they continue to overtrade or panic sell.

Why not?

Cohn – Financial Hired Gun?

Cohn is leaving at an interesting moment and I’m a what if guy.

  • What if this was planned far in advance?
  • What if this former banker from Goldman Sachs was brought in for the sole purpose of getting the Wall Street agenda passed?
  • Would a career investor stand to benefit after leaving that post? One that successfully helped corporate tax reform, the broader tax plan and deregulation? Perhaps his $200 million dollar severance from $GS was an up-front payment?
  • Or maybe his involvement with the “Paradise Papers” and its’ investigation is about to be brought to light?

Do I know the answers to any of those questions? Absolutely not. I have no way of knowing. What I do think is this though…it’s extremely possible.

My best guess is that Cohn was never intended to serve a full term. He was brought in to get that legislation through. His sudden aversion to the proposed tariffs has him so up in arms that he’s leaving seems implausible.

His work might just be done and now someone with different administrative goals is being brought in. Why else would Trump have heeded his advice up until now?

The Bottom Line

Markets are still red and further down that when I started writing this. But I don’t think this is the end. Don’t rush to sell anything unless it’s options with short-term expiries. Hedge your long positions with cheap and short-term puts if something is really down on you that you were bullish on before.

The truth of the matter of this….the President’s Chief Economic Advisor and the Director of the National Economic Council doesn’t have much of an impact on the prices of stocks, beyond speculative ones and policy-based ones. He’s already pushed policies through and I’m highly inclined to believe Trump won’t repeal them…so this market redness is all for naught is my opinion.

As always, make your own opinion though…I’m just speculating here. Trade safe.


P.S. – I know that’s not a picture of Gary Cohn as the featured image. This date, in 1876, is when Alexander Graham Bell patented the telephone. I wonder what he’d think of the smartphone you might be reading this on.

graham bell using first phone

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