Gary Cohn didn't just speak Wall Street's language. He served as an island of calm and a voice of reason inside a White House often gripped by chaos.
Cohn's abrupt resignation as President Trump's top economic adviser immediately spooked investors who had long been comforted by his market-friendly influence in the West Wing.
It's not just that Cohn's exit clears the way for tariffs that markets fear could spark a trade war. It's the view that Trump no longer has a powerful angel on his shoulder shouting down dangerous policy ideas.
"Wall Street just lost its security blanket," Chris Krueger, managing director of the Cowen Washington Research Group, wrote in a report. Krueger said he couldn't think of a replacement who will "give Wall Street as much comfort as Cohn."
Cohn's Goldman Sachs pedigree and free-market beliefs prevented investors from losing sleep over the fire-and-brimstone style of former adviser Steve Bannon and protectionist tendencies of National Trade Council Director Peter Navarro and Commerce Secretary Wilbur Ross.
Cohn is credited with quarterbacking the tax overhaul through Congress, a law that Wall Street loves and helped send the stock market surging earlier this year. He pushed for free trade, infrastructure spending and deregulation. Cohn criticized Trump's initial failure to condemn neo-Nazis, tried to get the administration to stay in the Paris climate accord and even admitted coal doesn't make "much sense anymore."
The loss of the "most market-friendly character in the administration" is raising concerns "in a world where White House policy is often seemingly influenced by whoever last spoke to the President," Bespoke Investment Group analysts wrote in a report.
The "exit of Cohn is certainly a reduced circuit breaker against policy missteps of all kinds," the firm wrote.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, said Cohn served as a "firewall against dumb and damaging economic initiatives" -- such as tariffs.
Now that Cohn is gone, the chances of Trump becoming more aggressive on trade has increased. That includes imposing tariffs on steel and aluminum imports without exclusions for allies, such as Canada and Mexico. The White House said it expects to make an announcement on tariffs at the end of this week.
Beyond tariffs, emboldened trade hawks in the administration may now push Trump to aggressively crack down on China's intellectual property theft. Given the lack of progress on talks to renegotiate NAFTA, Trump could even carry out his repeated threat to withdraw from the North American trade alliance.
Some think the focus on Cohn is overdone and the impact to the stock market will be brief. Indeed, the Dow has rebounded from the losses signaled Tuesday night. And Cohn's exit doesn't take away from the economic and earnings strength that has lifted stocks over the past several years.
"The economy is bigger than one guy, even if that guy used to be the No. 2 at Goldman Sachs," Michael Block, chief market strategist at Rhino Trading Partners, wrote in a report. "And it's not like Cohn had Trump's ear."
Trump could quickly reassure nervous investors by picking a replacement for Cohn who has a free trade and pro-business track record. Analysts say candidates include Navarro, former Fed official Kevin Warsh and CNBC commentator Larry Kudlow, a critic of the tariff plans.
White House press secretary Sarah Sanders told reporters on Wednesday that Trump will make a "good pick that will help him further building a strong economy and creating jobs."
The longer run concern among some analysts is about the overall direction of Trump's economic agenda.
For instance, ING currency strategist Viraj Patel noted that just months after enacting a tax cut that could increase trade deficits, Trump is now moving to tackle a "self-inflicted" trade deficit.
"It is this lack of US economic policy cohesion that is fueling a loss of confidence in the long-run trajectory of the US economy," Patel wrote in a report. He said history shows a "big policy regime shift (and a big character)" is needed to restore confidence."
- Why Wall Street loved Gary Cohn inside the White House
- Wall Street braces for tariffs after Gary Cohn resignation
- Dow futures tumble after Gary Cohn suddenly quits White House
- Top economic adviser Gary Cohn leaves White House in wake of tariff rift
- Gary Cohn is out; Europe tariff response; Costco earnings
- Ex-WH economic adviser Gary Cohn warns of trade war
- Gary Cohn and Rob Porter push back on Woodward book
- Gary Cohn: Jamie Dimon would be 'phenomenal' president
- White House tries again to reassure Wall Street
- White House adviser Navarro warns Wall Street 'globalists' over China