Down Arrow Button Icon

Goldman Sachs just sought to put a punctuation mark at the end of a Trump-inspired market rally that’s recently been losing steam. The firm, in a Friday night note to clients, threw cold water on expectations for sweeping tax reform, major new investments in infrastructure and regulatory rollbacks that had been driving post-election giddiness on Wall Street. Instead, Goldman’s chief economist Jan Hatzius writes, Republicans ruling both ends of Pennsylvania Avenue are getting bogged down in a knotty internal squabble over how to replace Obamacare — and diverted by the ongoing headaches from the political and legal challenges to President Trump’s travel ban. And while prospects for those campaign pledges that would have goosed growth look more remote, the bank notes that Trump is likely to follow through on trade and immigration crackdowns that “could be disruptive for financial markets and the real economy.” In sum, Hatzius writes, “one month into the year, the balance of risks is somewhat less positive in our view.”

Maybe most strikingly, Goldman — which speaks with some authority, having launched Trump’s handpicked Treasury Secretary, his chief strategist, and his top economic brain, among other key aides — is trimming hopes for a big public-works program. Trump’s guarantee that he’d repair the nation’s decrepit infrastructure formed the crux of his promise to the Rust Belt voters who lifted him to victory, and the push for such a project looked primed to scramble partisan allegiances on Capitol Hill. But as the bank notes, old habits die hard: “The political environment appears to be as polarized as ever, suggesting that issues that require bipartisan support may be difficult to address.” It’s conceivable that Trump could have leveraged his victory immediately to peel off Democratic votes in Congress for a rebuilding initiative. We’ll never know. He squandered that potential on the travel ban and by indulging the Congressional Republican itch to rip up the healthcare law, a campaign that’s provoked what over the weekend began to resemble a Tea Party-style grassroots protest movement on the left. As a consequence, Goldman has downgraded Trump’s promised trillion-dollar spending boom to a relative trickle of $25 billion a year.

Likewise, the across-the-board cuts to tax rates Trump said he’d swiftly deliver may be tougher to come by. In a pre-Super Bowl interview with Fox News’ Bill O’Reilly, the president on Sunday renewed his optimism that lawmakers will send him a tax reform bill he can sign by the end of the year. But Goldman, echoing updated assessments of other tax watchers, says it’s likely that package will slip into next year. Given the complexity of the task, and the big money already choosing sides in the debate over its shape, chances of a quick victory have already faded. And the odds for anything that slips into next year only grow longer as the midterm elections swing into view.

Tory Newmyer

@torynewmyer

tory_newmyer@fortune.com

Must Reads

Apple, Facebook, and Google Are Reportedly Drafting This Letter to President Trump [Fortune]

The missive from the tech giants and others — including Microsoft, Twitter, and Yahoo — will ask for major changes in Trump’s travel ban, which remains on hold after a federal judge put a nationwide block on it Friday.

Apple, Google, and Microsoft File a Legal Brief Opposing Trump’s Immigration Ban [Fortune]

The brief, filed Sunday in the U.S. Court of Appeals for the 9th Circuit, argues the ban “inflicts significant harm on American business.” In all nearly 100 firms, including Uber, eBay, and Netflix signed on.

Trump Agrees to Meet NATO Leaders in Europe in May [Fortune]

The president has called the 68-year-old alliance obsolete, prompting fears among some of the nation’s staunchest traditional allies about the new administration’s commitment to European security at a time when Russian president Vladimir Putin is ramping up hostilities in Ukraine.

Elon Musk Pushed Muslim Travel Ban to Top of Trump Meeting Agenda [Fortune]

The tech entrepreneur has taken plenty of public heat for remaining on Trump’s business council, especially after Uber CEO Travis Kalanick dropped off of it. So he took pains to point out, after the group’s inaugural meeting Friday, that he’d made good on his pledge to elevate concern about the travel ban to the top of the conversation.

Number of the day

$100 billion

The sum that the six biggest banks could return to investors through dividends and stock buybacks if Trump succeeds in rolling back financial services regulations, per a front-page story in the Wall Street Journal this morning. The president set the process in motion on Friday by ordering a review of the Dodd-Frank law with an eye toward gutting it.