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Decoding Signals Following the US Election

Decoding Signals Following the US Election

Thoughts on the Market vor 1 Jahr

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2:33

While the market waits for the incoming Trump administration to
present its policy agenda, our Global Head of Fixed Income and
Thematic Research Michael Zezas maps out some areas of early
investor interest, including regulation and the US Treasury
market.

----- Transcript -----

Welcome to Thoughts on the Market. I’m Michael Zezas, Morgan
Stanley’s Global Head of Fixed Income and Thematic Research.
Today on the podcast we’ll be talking about key themes coming out
of the US election.

It’s Thursday, Nov 14 at 10am in New York.

The US election is over, and now the work begins for President
Trump and Republican leaders in Congress. They’ll continue to
focus in the coming weeks on staffing key roles in the government
and fleshing out the policy agenda. When it comes to the economic
and markets outlook for 2025, those details will matter a lot –
particularly the sequencing and severity of changes to tariffs,
immigration, and tax policy. That means for us the next few weeks
will be key to learning what next year will look like. But there
are still some areas where there’s already some signal for
investors to lean on.

One is in the financial sector and relates to regulation. A
potentially delayed or diluted approach to bank regulation
resulting from the policies of the new administration is one
reason that our Banks Analyst Betsy Graseck is flagging a more
bullish outcome and substantial outperformance potential for the
sector. Similarly, our global head of credit research, Andrew
Sheets, notes this election outcome should boost M&A
activity, where an expected 50 percent pick-up in volumes next
year could reach 75 percent or more.

Another area is industrials, a sector where companies tend to
spend a lot on capital. The Republican sweep substantially
increases the chances that key tax benefits reducing the cost of
capital expenditures are extended in a timely fashion.

And in the U.S. treasury market, there’s signs that the most
volatile part of the increase in yields is behind us. While it's
true that extending expiring tax cuts means deficits will be
higher next year than they otherwise would have been, it's
basically just an extension of current policy – so any
incremental impact to growth and inflation expectations being
priced into this market is still an open question. This should be
helpful to fixed income markets finding their footing into year
end.

But, as we started off with, there’s a lot to be learned in the
coming weeks, and we’ll flag here what you need to know and how
it may impact the direction of markets.

Thanks for listening. If you enjoy the show, please leave us a
review wherever you listen to podcasts and share Thoughts on the
Market with a friend or colleague today.