Podcasts about thematic research

The US has levied over 100% tariffs on Chinese goods after a week of upwardly escalating retaliation. Trade appears to be decoupling between the world's first and second largest economies. Oliver Harvey, Head of EM Currency Research sits down with Yi Xiong, China Chief Economist and Mallika Sachdeva, Managing Director in Thematic Research to discuss the implications for China's economy, global trade flows and strategic considerations for the currency.

Our Global Head of Thematic Research Ed Stanley discusses how artificial intelligence is changing and what could be in store for investors in 2025.----- Transcript -----Welcome to Thoughts on the Market. I'm Ed Stanley, Morgan Stanley's Global Head of Thematic Research. Today I'll discuss how understanding AI's rate of change can generate alpha in the year of AI agents.It's Tuesday, the 14th of January, at 2 PM in London.Even if you haven't been using artificial intelligence in your work or home life yet – you'll doubtless have heard about its capabilities by now. Tasked, for example, with drafting an elevator pitch for a 100-page report; it's a tedious task at the best of times. But using an AI model not only does it become a breeze, but these models can also generate you a podcast – if you so wish – through which to disseminate it, and almost in any language conceivable. But now imagine the algorithm begins thinking through multi-stage processes itself – planning, executing – to generate that 100-page report itself, in the first place. That … is an example of Agentic AI. As the name implies, this next phase of AI development is where software programs gain agency, transitioning from reactive chatbots that we've been using into proactive task fulfillment agents. And this transition is happening now. Over the past 36 months, we've gone from reliable output that can displace or supplement 5-second or 5-minute tasks, such as translation or quick summaries, to models that are providing reliable output for 15-minute tasks, 1-hour tasks – like the ones that I just mentioned. And each time the skeptics have claimed that model improvements are slowing down, and thus call into question the returns on hundreds of billions of dollars that have been spent on AI infrastructure, the AI research labs manage to take another leap forward, surprising even seasoned analysts. That's why we think this is such an important trend for 2025. AI Adopter companies that can leverage these agents will start to pull ahead of their peers. And as a result, tracking AI's evolution in the materiality of companies' investment cases, we think, has never been more important. Since our first AI Adopter survey in January 2024 to our latest just published in January 2025, we've seen profound shifts in the thousands of stocks that we cover globally. This ongoing transformation not only underscores that AI's diffusion is advancing rapidly, but that we're still very much in its early innings.To understand the breakneck speed of the AI evolution through the lens of its impact on the stock markets, we need to wrap our heads around the concept of “rate of change.” We just published the third iteration of our AI mapping survey of 3,700 global stocks under coverage. And it reveals that 585 of those stocks had their AI exposure or materiality to investment case changed by our analysts – and that is just versus 6 months ago. And it impacts around $14 trillion of global market cap. And this rate of change in AI isn't just a buzzword; it's a tangible metric driving outperformance. So, if we look back in the second half of last year, 2024, stocks where our analysts previously increased both AI exposure and materiality in our last survey – went on to outperform broader equity markets by over 20 per cent in the second half of 2024. If we apply the same logic looking forward, where do we think most outperformance is going to come from? It's in those same stocks where our analysts have just upgraded the exposure and materiality to the investment case. Beyond this simple screen for AI outperformers we think there are three other key conclusions from our latest survey. The first is AI Enabler stocks with Rising Materiality, within which we believe that Semiconductors, which have outperformed well, might soon pass the baton to the Software layer in terms of equity market dominance. Second, Adopters with Pricing Power. These are companies that adopt AI early and use it to expand their margins but sustainably, without having to give it back to their customers. And the third is Financial stocks, in particular, where AI Rate of Change has been the fastest of any sector in our global coverage – in terms of the efficiency gains that we think it can manifest for the share prices. So all in all, 2025 promises a slew of significant developments in AI, and, of course, we'll be here to bring you all of the updates. Thank you for listening. If you enjoy the show, please leave a review wherever you listen to your podcasts and share Thoughts on the Market with a friend or a colleague today.

On this episode of Paisa Vaisa, Anupam chats with Nitin Bhasin, Head of Institutional Equities at Ambit. They explore Ambit's journey, its partnership with Daiwa, and their flagship 'Good and Clean' product. Dive into groundbreaking thematic research, gain valuable insights into India's economic outlook, and uncover Nitin's top book recommendations. Don't miss this insightful conversation on finance and investment trends!Get in touch with our host Anupam Gupta on social media: Twitter: ( https://twitter.com/b50 ) Instagram: ( https://www.instagram.com/b_50/ ) LinkedIn: (https://www.linkedin.com/in/anupam9gupta/ You can listen to this show and other awesome shows on the IVM Podcasts website at https://www.ivmpodcasts.com/ You can watch the full video episodes of PaisaVaisapodcast on the YouTube channel. Do follow IVM Podcasts on social media. We are @ivmpodcasts on Facebook, Twitter, & InstagramSee omnystudio.com/listener for privacy information.

„Das mit der staatlichen Rente wird in der Demokratie, in der wir leben, nicht länger funktionieren“, warnt Hans-Jörg Naumer im neuesten Interview. Baumer ist promovierter Volkswirt und leitet seit 2000 den Bereich Capital Markets & Thematic Research bei der Fondsgesellschaft Allianz Global Investors. Der Experte fordert, dass die Politik den Menschen endlich reinen Wein einschenken muss und die politischen Rahmenbedingungen für den privaten Vermögensaufbau geschaffen werden müssen. "Wenn ich höre, dass man hierzulande unwidersprochen sagen kann, Kapitaldeckung, Altersvorsorge auf Aktien ist Kasinokapitalismus, dann weiß ich nicht, ob ich heulen oder mich schlapp lachen soll, weil er so verkehrt ist", so Naumer. Er fordert endlich mehr ökonomische Bildung und dass die Staat den privaten Vermögensaufbau nicht länger behindert.

Our Global Head of Fixed Income and Thematic Research joins our U.S. Public Policy Strategist to give investors their policy expectations for President-elect Trump's second term, including the potential market and economic consequences of those policies if enacted.----- Transcript ----- Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's global head of fixed income and thematic research.Ariana Salvatore: And I'm Ariana Salvatore, U.S. public policy strategist.Michael: And on this episode of Thoughts on the Market, we'll talk about potential policy paths the second Trump administration might pursue.It's Monday, December 23rd at 10am in New York.The U.S. presidential election is behind us and we're well into the holiday season, but we're still focusing closely on what U.S. policy might look like in 2025. Ariana, what have we learned in the past couple of weeks regarding Trump's policy plans for next year?Ariana: So the variables or policy items that we're watching are still the same ones that we were tracking over the past year or so. That's tariffs, taxes, immigration and deregulation. But to your point, the election is now obviously behind us, and we do have some incremental information that's helped us construct a base case across these variables. For example, President elect Trump has made some key personnel appointments that we think are going to play a big role in exactly how these policies are carried out. His pick for Treasury Secretary, Scott Besant, is a good example that gives us conviction in a more gradual, incrementalist approach to tariffs. Translating that principle across all the policy variables, as well as the extremely thin majority the Republicans have in the House of Representatives, has helped us form the foundation of our base case, which we call “fast decisions, slow implementation.”In short, we think that means you should expect major policy changes will be announced quickly, think first quarter of next year, but achieved more slowly. That, in our view, enables more benign macro conditions to persist into 2025, but does create some more uncertainty, both positive and negative, into 2026. We think that lag is attributable to a variety of logistical, legal, and political constraints, and does vary depending on the policy area and executive authorities. For example, we think Trump might have an easier time unilaterally modifying tariff rates, but other constraints outside of timing might limit implementation nonetheless.So, Michael, taking this a step beyond just the policy paths, how should investors be thinking about the potential market and economic consequences of our base case? Aside from the specific policy changes, how do you think about our base case in terms of broader market themes?Michael: I think the key takeaway here is that the policy path we're describing puts pressure on economic growth, but on a lag. So most of these effects are for later in 2025 or into 2026 per economist expectations. So I think the key takeaway here is that the policy path we're describing exerts pressure on economic growth, albeit on a lag. So in our economist expectations later in 2025 and into 2026. So what that means is as we go into 2025, there's still a pretty good growth backdrop to support risk assets and equities in particular. It's also a pretty good backdrop for bonds because as we get closer to 2026, our bond strategist expectation is that markets will start to reflect expectations of growth pressure. And they'll probably be less concerned about what's a debate right now, which is the size of U.S. deficits. There's been this expectation that policies extending tax cuts would really grow the deficit substantially in the way that might put downward pressure on bond prices.However, we think when investors take a closer look, they'll see that extending current tax cuts, which is our expectations, basically, they'll be able to extend current tax cuts with a few sweeteners on top, that's mostly an extension of current policy, as opposed to some of the headlines in the news talking about major deficit expansion, that's an expansion relative to if Congress did nothing and just let tax cuts expire. So the year over year difference in deficits is perhaps not as big as some of the headlines would suggest. So that's a good backdrop for bonds and a pretty good backdrop for equities and risk assets, at least to start the year.Ariana: But of course, there's a lot of uncertainty embedded in these policy paths. Can you talk through how we're thinking about potential risks to our base case, or maybe some key signposts that could indicate that other scenarios are becoming plausible?Michael: So if there are policies that shift that growth downside sooner, so instead of it manifesting in 2026, it manifests sooner in 2025, that's the type of thing that might make us less constructive on risk assets and equities. So if we got indications, for example, that tariffs were going to be implemented more quickly and to a greater degree, for example, announcements happening quickly, but also showing implementation is happening very quickly, that's the type of thing that might skew risk assets in a more negative direction. Similarly, if Congress were to pledge to appropriate more powers to the executive branch on tariff authority, not necessarily something we think they could get done, but that could be an indication that there could be more powerful tariff potential relative to what the executive branch currently has.On the more positive side, if Congress indicates that it wants to move much faster and bigger on tax cuts and the executive branch were to flag that tariffs are going to be implemented later or suggest that there's more negotiating room with trade partners to avoid tariffs, then that might be the type of sequencing of policy that enables the market to focus more on the good aspects of policy, the helpful aspects to corporate earnings, to individual consumption, and to GDP growth that might just make for an all around more conducive environment to risk assets.So there's a lot to keep an eye on between now and inauguration day. In the meantime, enjoy your holiday. Ariana, thanks for taking the time to talk.Ariana: Great speaking with you, Mike.Michael: And as a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us wherever you listen, and share our thoughts on the market with a friend or colleague today.

Our Global Head of Fixed Income and Thematic Research explains why President-elect Trump's proposed tariff plans may look different than the policies that are ultimately put in place.----- 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 I'll be talking about what investors need to know about tariffs.It's Wednesday, Dec 4, at 2 pm in London.There's still over a month before Trump takes office again. But in the meantime he's started sending messages about his policy plans. Most notably, for investors, he's started talking about his ideas for tariffs. He's floated the idea of tariffs on all imports from China, Mexico, and Canada. He's talked about tariffs on all the BRICs countries unless they publicly dismiss the idea of pursuing an alternative reserve currency to the US dollar. In short, he's talking about tariffs a lot.While we certainly don't dismiss Trump's sincerity in suggesting these tariffs, nor the ability for a President to execute on tariffs like these – well, mostly anyway – it's important for investors to know that the ultimate policies enacted to address the concerns driving the tariff threats could look quite different than what a literal interpretation of Trump's words might suggest. After all, there are plenty of examples of policies enacted on Trump's watch that address his concerns that were not implemented exactly as he initially suggested.The Tax Cuts and Jobs act is a good example, where Trump advocated for a 15 percent corporate tax rate but signed a bill with a 21 percent tax rate. Another is the exceptions process for the first round of China tariffs, where some companies got exceptions based on modest onshoring concessions. These examples speak to the idea that procedural, political, and economic considerations can shape policy in a way that's different from what's initially proposed.This is why our base case for the US policy path in 2025 includes higher tariffs announced shortly after Trump takes office; but with a focus on China and some exports from Europe; and implementation of those tariffs would ramp up over time, as has been suggested by key policy advisors. There's broad political consensus on a stronger tariff approach to China, and there's already executive authority to take that approach. Something similar can be said about Europe, but with a focus more on certain products than across imports broadly. However, we see scope for Mexico to avoid incremental tariffs through negotiation. And a global tariff via executive order risks getting held up in court, and we're skeptical even a Republican-controlled Congress would authorize this approach.Of course we could be wrong. For example it's possible the incoming administration might be less concerned about the economic challenges posed by a rapid escalation of tariffs. So if they start quicker and are more severe than we anticipate, then our 2025 economic projections are probably too rosy, as are our expectations for equities and credit to outperform over the next 12 months. The US dollar and US Treasuries might be the outperformer in that scenario.So stick with us, we'll be paying attention and trying to tease out the policy path signal from the media noise from the new administration.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.

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.

With a second Trump term at least partially reflected in the price of global markets, we focus on two key debates for the longer-term: Potential tariffs and fiscal policy. ----- 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 – some initial thoughts on the market implications of a second term for President Trump.It's Wednesday, Nov 6, at 2pm in New York.As it became clearer on election night that Former President Trump was set to win a second term in the White House, markets began to price in the expected impacts of resulting public policy choices. The US dollar rallied, which makes sense when you consider that President Trump has argued for higher tariffs, something that could hurt rest of world growth more than the US. US Treasuries sold off and yield rose, something that makes sense given President Trump supports tax policy choices that could meaningfully expand deficits. And US equity markets rallied led by key sectors that could benefit fundamentally from extended tax breaks and deregulation, including industrials and energy. But with a second Trump term now at least partially reflected in the price of markets across assets, it gets harder from here to understand how markets move. There's several key debates we'll be tracking, here's two that are top of mind. First, how will tariffs be implemented? Per the work of our economists, higher tariffs can raise inflation and crimp growth. They estimated that a blanket 10 per cent tariffs and 60 per cent tariffs on China imports would raise inflation by 1 per cent and dampen GDP growth by 1.4 per cent. Some pretty big numbers that would really challenge the soft-landing narrative and positive backdrop for equities and other riskier assets. Other approaches may carry the same risks, but to a lesser degree. Tariffs exercised via executive authority would, in our view, likely have to be targeted to countries and products – as opposed to implemented on a blanket basis. So, the approach to tariffs could represent a substantial difference in the outlook for markets. Second, how quickly and to what degree might US deficits expand? Our presumption has been that fiscal policy action, regardless of US election outcome, wouldn't become clear until late 2025, largely governed by the need to address several provisions from the Tax Cuts and Jobs Act that expire at the end of that year. But, while not our base case it's of course possible that a Republican Congressional majority could deliver on tax cuts earlier – and perhaps even in larger size. The resolution to this debate could make the difference between yields climbing even higher than they have recently and taking a pause at these levels. Bottom line, as the election ends and the Presidential transition begins, there's a lot about policy implementation that we can learn to guide our market strategy. We'll be paying attention to all the key policymaker statements and deliberations, and feed through the signal to you.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.

Our Global Head of Fixed Income and Thematic Research, Michael Zezas, outlines how investors should navigate the closing days of the presidential campaign -- including a vote-counting period that could extend past Election Day.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Today is going to be a little bit different. We're exactly six days away from the US election. The race is neck-and-neck, and I want to sketch out what investors should expect in the next couple of weeks. It's Wednesday, October 30, at 10 AM in New York.This is an historic election, and the outcome remains highly uncertain. What's more, there's a good chance we won't know the winner on election night due to close vote counts. My colleagues and I have spent a lot of time on this show trying to give our listeners a sense of how the election might impact different economies around the word as well as markets, sectors, and specific industries. But today I want to take a step back and highlight a few things that investors should keep in mind right now. To sum up what we've covered so far: The key policies at stake are taxes, tariffs, and immigration. Congressional composition will be critical in determining the extent of tax cut extensions in either win outcome. Domestic, consumer-oriented sectors are most exposed to tax changes, while clean-tech is the most exposed to potential efforts at a repeal of the Inflation Reduction Act. Macro impacts vary depending on the scope of policies and their sequencing, but we see downside risks to growth in a Republican win outcome. As our listeners know, a candidate needs 270 Electoral College votes to win. Former President Trump's most likely path to victory is through the Sun Belt – Arizona, North Carolina and Georgia; while Vice President Harris' most likely path to victory is through the so-called Blue Wall – Michigan, Wisconsin and Pennsylvania. In terms of the Senate, polling and prediction markets have consistently implied higher likelihood of Republicans winning control. Democrats are defending more seats in states that Trump won in 2020, as well as more seats in states Biden won by a small margin. As far as the House of Representatives, Republicans need 11 of the 25 toss-up seats to maintain control of the House, and Democrats need 15. The generic ballot is the most reliable House indicator, in our view. It's a political poll which asks not which candidate you plan to vote for to represent you in Congress, but rather which political party – Democrat, Republican or Independent – that you would support. The generic ballot historically correlates with the House winner, and it currently favors Democrats. All this leaves us with two key takeaways: First, don't expect conclusive results on election night. Early vote data from key states reflects our view that vote-by-mail levels are lower than in 2020 but still elevated versus historical levels. And it may take days to get all the mail-in votes counted. Second, full election results may differ from early returns. Why is that? A candidate may have a deficit in election night vote counts but still come back to win the race once all ballots are counted. This depends on two key variables: The share of the electorate who vote by mail; and the skew among those ballots toward Democrats – a blue shift – or Republicans – a red shift. So again, we need to be patient and wait for the final results. And when that happens, we will start digging deep into the post-election outlook for the economy and 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.

Our expert panel explains whether the US election will impact energy policy, including how the Inflation Reduction Act's possible fate and increased tariffs could transform the sector.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research.David Arcaro: I'm Dave Arcaro, Morgan Stanley's US Power and Utilities Analyst.Andrew Percoco: And I'm Andrew Percoco, the North American Clean Tech Analyst here at Morgan Stanley.Michael Zezas: And today we're discussing another key election related topic that generates a lot of political and market debate: Energy policy.It's Thursday, October 17th at 10am in New York.The outcome of the 2024 election will likely determine the direction of U.S. climate policy for years to come. David, what are the key focus areas for investors as they evaluate the various election outcomes on the utilities and clean energy industries?David Arcaro: Yeah, Mike, investors are highly focused on the Inflation Reduction Act, the IRA, especially as it pertains to the election and the clean energy space. This was a law that was passed in 2022, and it really has supportive policies across the entire clean energy spectrum. It's got tax credits and incentives for solar, wind, offshore wind, green, hydrogen, nuclear, you name it. Battery storage. And some of those tax credits go all the way to 2032 and beyond in some cases.So, it's a very supportive policy when it comes to the clean energy industry and the growth outlook. So, the big question is what's going to happen to the Inflation Reduction Act – depending on which administration is in place following the election.Our core view is that the IRA stays in place; that the core wind, solar storage and nuclear tax credits all remain, regardless of the outcome of the election. And then separately, investors are focused on tariff policy as it pertains to clean energy. It is a global industry. A lot of the equipment and materials are imported around the world. And so, any changes to the tariff approach could have an impact on the space as well.Michael Zezas: Got it. And so how does the outlook for renewables change under different election outcomes?David Arcaro: Yeah, really, the outlook for renewables growth is not very different in our view, regardless of the outcome of the election.We think it's a strong growth outlook either way. And part of that is because we've got policies that we expect to stay in place that will be supportive regardless of the outcome, as I mentioned with the Inflation Reduction Act. And then we've also got demand. It's a very strong demand backdrop for the renewable space – and that's because in the electric industry, we're seeing an inflection in electricity usage across the US.It's been stagnant for years and years, but now with data center growth, with industrial production accelerating, and manufacturing and onshoring, we're seeing a big change in the growth outlook for electricity usage. And that means we need more power plants. We need more to be built, and renewables are going to be the predominant new resource for producing electricity in the US.Some of these companies like data centers, they want renewables to power their operations. And most utilities, electric companies that are building power plants, they're going to be using renewables more than anything else. There are impediments to building fossil plants, it's challenging to permit and there's supply chain delays and issues.So, we think there's a very strong growth outlook for renewables based on that demand and the policy support going forward, regardless of the outcome.Michael Zezas: And Andrew, how about corporate tax policy, including renewable energy tax credits?Andrew Percoco: I mean, as Dave mentioned, we think IRA repeal risk is very low, and I think the only scenario where IRA repeal is a relevant conversation is in a Republican sweep scenario. But even under this scenario, we would expect any repeal measures to be targeted in nature and not a wholesale repeal of the bill. So, the question then becomes, you know, what is safe and what's at risk of getting cut.So, to start off with what's safe; maybe three items that I'll highlight. One would be domestic manufacturing tax credits. There's been a lot of bipartisan support for the onshoring of manufacturing. So, the clean energy manufacturing tax credits within the IRA look like they are on solid footing, regardless of the election outcome.Now, why do domestic manufacturing tax credits have bipartisan support? One, there's a general view that we need to reduce our reliance on China for our energy infrastructure and, two, the job creation angle. The IRA has created over 150, 000 new jobs, and a lot of those jobs are in states where there is a large representation of Republican voters. So, the local pushback would be pretty severe if IRA was repealed in full.Number two, area of IRA that we think is safe would be nuclear tax credits. There's a general understanding across both sides of the aisle that nuclear is an important and reliable form of clean energy, and that we need to support the existing fleet of assets.And then third again, as Dave mentioned, solar storage and wind investment tax credits. These have been around for a while, well before the IRA was in place and they've had bipartisan support. They've been extended multiple times, even under past Republican administrations. So, we would not expect any changes to those core tax credits in a Republican sweep.On the flip side, you know what's potentially at risk in a Republican sweep? Number one would be consumer facing tax credits like the EV tax credits. This is something that the Republicans have definitely taken aim at on the campaign trail.Number two would be offshore wind. Former President Trump has definitely had [a] very candid view of offshore wind, and the issues that it poses on local communities. So, this could be another area where, they look for some targeted repeal. And then the third would just be delayed implementation of any unfinalized rules, by the time they take office.Michael Zezas: Makes sense. And finally, what other key election implications should investors focus on at this point when it comes to clean energy?Andrew Percoco: Yeah, I think the biggest would be around tariffs. It's frankly the hardest to predict but could have some pretty meaningful near-term implications for clean energy.Just to zoom out for a second, the clean energy supply chain is global with a heavy concentration in China and Southeast Asia. So, if there is higher tariffs put in place against these regions, it could create some disruption in supply chains and impact the pace at which we deploy renewables in the US. But frankly, at the same time, it should just accelerate a trend that we're already seeing in the US, which is the onshoring of manufacturing, thanks in part due to the IRA.So ultimately could create some near-term disruption but doesn't change the secular growth for the renewable space since developers in the US have already started to make the shift towards domestic supply.Michael Zezas: Yeah, that makes sense, Andrew. And obviously tariffs have been top of mind for investors as we've talked about here. Well, David, Andrew, thanks for taking the time to talk.And as a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us wherever you listen and share Thoughts on the Market with a friend or colleague today.

Our Global Head of Fixed Income and Thematic Research Michael Zezas and Chief Asia Economist Chetan Ahya discuss how the upcoming US elections might impact economic policies in Asia.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research.Chetan Ahya: And I'm Chetan Ahya, Morgan Stanley's Chief Asia Economist.Michael Zezas: Today, we'll talk about what the US election means for Asia's economy.It's Wednesday, October 9th at 10am in New York.Chetan, we're less than a month now from the US election, and when I think about what it means for Asia, perhaps the most immediate and direct impact would be via tariffs.Now, our colleagues have already addressed some of this on the podcast, but I'm eager to hear your thoughts. And in the case of a Trump win and a significant tariff increase on China, how big of an impact do you think this policy would have on China's economy, and what particular areas of the economy might be most affected?Chetan Ahya: Well, Mike, I think firstly the tariff numbers being floated, i.e. that if it is 60 per cent, it would mean an increase in tariff of about 35 percentage points over an existing number, which is at 25 per cent. So, the amount of tariffs that we're talking about this time are larger than what we saw in 2018-19. And in terms of implications, of course, it will depend upon exactly what is the magnitude of tariff that is being imposed, but we definitely think there will be a significant downside to China's growth; and we expect an increase in deflationary pressures.Just to give you a bit of perspective of what happened in 2018-19, tariff resulted into China's growth slowing by a full percentage point from 6.9 per cent to 5.9 per cent; and at the same time, we saw that there was downward pressure on China's inflation dynamic. And the timing of tariffs this time does not seem to be great. China is going through an existing challenge of debt deflation loop. And we've seen that China's GDP deflator, which is a broader measure of prices, has been in deflation already for about seven quarters now. And so, in this context, tariffs will further add to its deflationary pressures and make that macro situation much more complicated.Michael Zezas: Got it. And so, how do you think China might respond if it becomes the target of higher tariffs?Chetan Ahya: So, we think China's policy makers could take up three sets of measures to mitigate the impact of tariffs.Number one, there will be, of course, depreciation in its exchange rate, which will be offsetting some part of the tariff increase effect. And so, for example, the weighted average tariff increase was about 18 percentage points during 2018-19, and the RMB depreciation was about 11 per cent. So, there was a significant offset of that tariff increase by currency depreciation.Number two, China could continue to take its effort to rewire trade flows and supply chain. So, for example, in 2018-19, we've seen a significant rewiring of exports from China to the US via Vietnam and Mexico, and we think this time that could be expanded to some more economies.And number three, China also resorted to focusing on new markets, i.e. some of the other emerging markets other than US. And at the same time, they focused on introducing new export products; like in the last cycle, they focused on solar panels, lithium batteries, EVs, and old generation chips. So, in effect, they will try to expand their market base from US into other emerging markets. And at the same time, they will be focusing on new products to ensure that their market share in global goods exports is maintained.So, Mike, we've been discussing the potential impact of a Trump win. But how would a Harris White House shape trade policy, vis-à-vis China and rest of Asia?Michael Zezas: Yeah, I think a Harris White House would represent a lot of continuity with the Biden White House's approach toward Asia and China, specifically when it comes to trade. That is to say, there's a lot of support for continued use and expansion of non-tariff barriers – things like export controls, and inbound and outbound investment restrictions. And there's less interest in using higher tariffs than what we already have as a tool.So, you can expect that. And I think you could also expect there to be kind of a broader reach out to develop economic relationships with Pan Asia as a means of enabling some of the transition that multinational companies would need to rewire their supply chains.But if we take as a given that that might be Harris's approach to trade policy, Chetan, what's your outlook for Asia if she wins in November?Chetan Ahya: Well, if Harris wins, that would eliminate the key risk to region's outlook in form of significant tariff implementation. And in this case, we expect status quo to our Asia forecast. And we would maintain our constructive outlook for the large economies in the region. And within the group, we think India and Japan are best positioned from a structural standpoint. While China, we were concerned about the debt deflation loop, but with the recent set of policy measures, we think that the risks are now more balanced as far as China macro-outlook is concerned.Michael Zezas: Got it. Well, Chetan, thanks for taking the time to talk. This is obviously a very important topic as we get closer to the US election.Chetan Ahya: Great speaking with you, Mike.Michael Zezas: And as a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us wherever you listen; and share Thoughts on the Market with a friend or colleague today.

Thousands of U.S. dockworkers have gone on strike along the East Coast and Gulf Coast. Our Global Head of Fixed Income and Thematic Research Michael Zezas joins U.S. economist Diego Anzoategui to discuss the potential consequences of a drawn-out work stoppage.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley.Diego Anzoategui: And I'm Diego Anzoategui from the US Economics team.Michael Zezas: And today, we'll be talking about the implications of this week's US dockworker strike on the US economy.It's Wednesday, October 2nd, at 11am in New York.Diego, as most of our listeners likely know, yesterday roughly 45,000 US dockworkers went on strike for the first time in perhaps decades at 36 US ports from Maine to Texas. And so, I wanted to get your initial read on the situation because we're obviously getting a lot of questions from clients concerned about what this could mean for growth and inflation.Diego Anzoategui: Yeah, of course, there's a lot of uncertainty about this situation because we don't know how long the strike is going to last. But the strike can in principle hit economic growth and boost inflation -- but only if it is long lasting, right. Local producers and retailers, they typically have inventories of final and intermediate goods, so the disruption needs to be long enough so that those inventories go down to critical levels in order to see a meaningful macroeconomic impact.But if the strike is long enough, we might see an important impact on economic activity and inflation. If we look at trade flows data, roughly 30 per cent of all goods imports and exports are handled by the East and Gulf ports.Michael Zezas: So then let's drill down on that a bit. If the strike continues long enough and inventories decline, what are the shocks to economic growth that you're considering?Diego Anzoategui: Yeah, I would think that there are two main channels through which the strike might hit economic activity. The first one is a hit to local production because of disruptions in the supply of capital goods and intermediate goods used for domestic production. We not only use the ports to bring final goods, but also intermediate and capital goods like machinery, basic metals, plastic, to name a few.And the second channel is directly through exports. The East Coast and Gulf ports channel 84 per cent of exports by water. Industries producing energy, chemicals, machinery, cars, might be affected by these bottlenecks.Michael Zezas: Right, so fewer potential imports of goods, and fewer potential productive capacity as a consequence. Does that have an impact on inflation from your perspective?Diego Anzoategui: Yes, it can have an impact on inflation. Again, assuming that the strike is long lasting, right? I would expect acceleration in goods prices, in particular key inputs coming from the Eastern Gulf ports. And these are cars, electronics, clothes, furniture and apparel. All these categories roughly represent 13 per cent of the core PCE basket, the price index.Also, you know, a meaningful share of food and beverages imports come through water. So, I would also expect an impact there in those prices. And in terms of what prices might react faster, I think the main candidate is food and beverages -- and especially perishable food that typically have lower inventory to sales ratios.And if we start seeing an increase in those prices, I think that would be a good early signal that the disruptions are starting to bite.Michael Zezas: That makes sense. And last question, what about the impact to the US workforce? What would be the impact, if any, on payroll data and unemployment data, reflecting workforce impact -- the types of data that investors really pay close attention to.Diego Anzoategui: Yeah. So, we will likely see an impact on nonfarm payrolls, NFP, and the unemployment rate if the strike is long lasting. But even if there are not important disruptions, the strike itself can mechanically affect October's nonfarm payrolls print. They want to be released in November. Remember that strikers don't get paid, and they are not on the payroll; so they are not be[ing] counted by the establishment survey.But a necessary condition to see this downward bias in the NFP reading is that the strike needs to continue next week, that is the second week of October, right. But know that The Fed tends to look through these short run fluctuations in NFP due to strikes -- because any drag we see in the October sprint will likely be followed by payback in November if the strike is short lived.Michael Zezas: Got it. That makes a lot of sense. Diego, thanks for making the time to talk with us as this unfolds. Let's hope for a quick resolution here.Diego Anzoategui: Thanks, Michael. Great speaking with you.Michael Zezas: And thanks for listening. If you enjoy Thoughts on the Market, please be sure to rate and review us on the Apple Podcasts app. It helps more people find the show.

With the US presidential race being as closely contested as it is, Michael Zezas explains why patience may be a virtue for investors following Election Day. ----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about why investors should prepare to wait to get clarity on the US election result. It's Wednesday, September 25th at 10:30am in New York. As we all know, markets dislike uncertainty; and one of the biggest potential catalysts between now and the end of the year is the results of the US presidential election. So it's important for investors to know that the timing of knowing the outcome may not be what you expect. On most U.S. presidential election days, the outcome is known within hours of polls closing in the evening. That's because while all votes may not yet have been counted, enough have to make a reasonable projection about the winner. But that's not what happened in 2020. Vote counts were tight across many states. A condition that was compounded by the slowness of counting mail in ballots, which was a style of voting more widely adopted during the pandemic. As a result, news networks didn't make a formal outcome projection until about four days after election day.Rather than a reversion to the norm of quickly knowing the result for the 2024 election, we expect an outcome similar to 2020. It could be days before we reliably know a result.The same dynamics as 2020 are in play. Polls show a very close race. And while more voters are likely to show up in person this year, voting by mail is still expected to represent a substantial chunk of ballots cast this cycle. That's because many states' rules automatically send mail-in ballots to those who voted by that method in the last election. And some recent news out of Georgia underscores the potential for a slower result. The state just adopted a rule requiring all its votes to be hand-counted.Now, this may not matter if either candidate has enough votes without Georgia to win the electoral college. But if Georgia is the deciding or tipping point state then a longer wait becomes possible. Per the 538 election forecast model, there's about an 11 per cent chance that Georgia plays this role.So, bottom line, investors may have to be patient this November. It could take days, or weeks, to reliably project an election outcome, and therefore start seeing its market effects.Thanks for listening. If you enjoy the podcast, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

While the electoral impact of last week's US presidential debate is unclear, our Global Head of Fixed Income and Thematic Research offers two guiding principles to navigate the markets during the election cycle.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about takeaways from the US presidential campaign debate. It's Wednesday, September 18th at 10:30am in New York. Last week, Vice President Harris and Former President Trump met in Philadelphia for debate. Investor interest was high, and understandably so. As our Chief Economist Seth Carpenter has previously highlighted in his research, visibility remains low when it comes to the outlook for the US in 2025. That's because the election could put the country on policy paths that take economic growth in different directions. And of course, the last presidential debate in June led to President Biden's withdrawal, changing the race dramatically. So, any election-related event that could provide new information about the probability of different outcomes and the resulting policies is worth watching. But, as investors well know from tracking data releases, earnings, Fedspeak, and more, potential catalysts often remain just that – potential. For the moment, we're putting last week's debate in that category. Take its impact on outcome probabilities. It could move polls, but perhaps not enough for investors to view one candidate as the clear favorite. For weeks, the polls have been signaling an extremely tight race, with only a small pool of undecided voters. While debates in past campaigns have modestly strengthened a candidate's standing in the polls, in this race any lead would likely remain within the margin of error. On policy, again we don't think the debate taught us anything new. Candidates typically use these widely watched events to influence voters' perceptions. The details of policies and their impact tend to take a back seat to assertions of principles and critiques of their opponents. This is what we saw last week. So if the debate provided little new information about the impact of the election on markets, what guidance can we offer? Here again we repeat two of our guiding principles for this election cycle. First, between now and Election Day, expect the economic cycle to drive markets. The high level of uncertainty and the lack of precedent for market behavior in the run-up to past elections suggest sticking to the cross-asset playbook in our mid-year outlook. In general, we prefer bonds to equities. While our economists continue to expect the US to avoid a recession, growth is slowing. That bodes better for bonds, where yields may track lower as the Fed eases, as opposed to equities, where earnings may be challenged as growth slows. Second, lean into market moves that election outcomes could accelerate. For several months, Matt Hornbach and our interest rate strategy team have been calling for a steeper yield curve, driven by lower yields in shorter-maturity bonds. They have been guided by our economists' steadfast view that the Fed would start cutting rates this year as inflation eases. We doubt that policies in Democratic win scenarios would change this trend, and a Republican win could accelerate it in the near term, as higher tariffs would imply pressure on growth and possibly further Fed dovishness. Pricing that path could steepen the yield curve further. And of course, there's still several weeks before the election to get smart on the economic and market impacts of a range of election outcomes. We'll keep you updated here. Thanks for listening. If you enjoy the podcast, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

Despite a flurry of election news, little may have changed for investors weighing the possible outcomes. Our Head of Fixed Income and Thematic Research, Michael Zezas, explains why this is the case as we move closer to Election Day. ----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about recent developments in the US election.It's Wednesday, September 4th at 10:30am in New York. While news headlines might make it seem a lot has changed in recent weeks around the US election, in our view not much has changed at all. And that's important for investors to understand as they navigate markets between now and Election Day on November 5th. Let me explain. In recent weeks, we've had the Democratic convention, fresh polls, and a third party candidate withdraw from the race and endorse former President Trump. But all appear to reflect only marginal impacts on the probabilities of different electoral outcomes. Take the withdrawal of independent candidate Robert F Kennedy Junior, which does not appear to be a game changer. Historical precedent is that third party candidates rarely have a path to even winning one state's electoral votes. Further, in polls voters tend to overstate their willingness to support third parties ahead of election day. And it's also not clear that Kennedy withdrawing clearly benefits Democrats or Republicans. Kennedy originally ran for President as a Democrat, and so was thought to be pulling from likely Democratic voters. However, polls suggest his supporter's next most likely choice was nearly split between Trump and Harris. So while it's possible that Kennedy's decision to endorse Trump upon dropping out could be meaningful, given how close the race is, we're unlikely to be able to observe that potentially marginal but meaningful effect until after the election has passed. And such effects could easily be offset by small shifts favoring Democrats, who are showing some polling resiliency in states where just a couple months ago the election was not assumed by experts to be close. For example, Cook Political Report, a site providing non-partisan election analysis, shifted its assessment of the Presidential election outcome in North Carolina from “lean Republican” to a “toss-up.” Similarly, in recent weeks the site has shifted states like Arizona, Nevada, and Georgia into that same category from “lean Republican.” These shifts are mirrored in several other polls released last week showing a close race in the battleground states. So for all the changes and developments in the last week, we think we're left with a Presidential race that's difficult to view as anything other than a tossup. To borrow a term from the world of sport – it's a game of inches. Small improvements for either side can be decisive, but as observers we may not be able to see them ahead of time. And so that brings us back to our guidance for investors navigating the run up to the election. Let the democratic process unfold and don't make any major portfolio shifts until more is known about the outcome. That means the economic cycle will drive markets more than the election cycle in the next couple months. In our view, that favors bonds over stocks. Lower inflation enables easier monetary policy and lower interest rates, good for bond prices; but growth concerns should weigh on equities. Thanks for listening. If you enjoy the podcast, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

While venture capital is taking a more cautionary approach with crypto startups, the buzz around GenAI is only increasing.----- Transcript -----Welcome to Thoughts on the Market. I'm Ed Stanley, Morgan Stanley's Head of Thematic Research in Europe. Along with my colleagues bringing you a variety of perspectives, today I'll discuss what private markets can tell us about the viability and investability of disruptive technologies. It's Tuesday, the 3rd of September, at 2pm in London. For the past three years we have been tracking venture capital funding to help stay one step ahead of emerging technologies and the companies that are aiming to disrupt incumbent public leaders. Private growth equity markets are -- by their very definition – long-duration, and therefore highly susceptible to interest rate cycles. The easy-money bubble of 2021 and [20]22 saw venture funding reach nearly $1.2trillion dollars – more than the previous decade of funding combined. However, what goes up often comes down; and since their peak, venture growth equity capital deployment has fallen by over 60 percent, as interest rates have ratcheted ever higher beyond 5 percent. So as interest rates fall back towards 3.5 percent, which our economists expect to happen over the coming 12 months, we expect M&A and IPO exit bottlenecks to ease. And so too the capital deployment and fundraising environment to improve. However, the current funding market and its recovery over the coming months and years looks more imbalanced, in our view, than at any point since the Internet era. Having seen tens- and hundreds of billions of dollars poured into CleanTech and health innovations and battery start-ups when capital was free; that has all but turned to a trickle now. On the other end of the spectrum, AI start-ups are now receiving nearly half of all venture capital funding in 2024 year-to-date. Nowhere is that shift in investment priorities more pronounced than in the divergence between AI and crypto startups. Over the last decade, $79billion has been spent by venture capitalists trying to find the killer app in crypto – from NFTs to gaming; decentralized finance. As little as three years ago, start-ups building blockchain applications could depend on a near 1-for-1 correlation of funding for their projects with crypto prices. Now though, despite leading crypto prices only around 10 percent below their 2021 peak, funding for blockchain start-ups has fallen by 75 percent. Blockchain has a product-market-fit and a repeat-user problem. GenerativeAI, on the other hand, does not. Both consumer and enterprise adoption levels are high and rising. Generative AI has leap-frogged crypto in all user metrics we track and in a fraction of the time. And capital providers are responding accordingly. Investors have pivoted en-masse towards funding AI start-ups – and we see no reason why that would stop. The same effect is also happening in physical assets and in the publicly traded space. Our colleague Stephen Byrd, for example, has been advocating for some time that it makes increasing financial sense for crypto miners to repurpose their infrastructure into AI training facilities. Many of the publicly listed crypto miners are doing similar maths and coming to the same outcome. For now though, just as questions are being asked of the listed companies, and what the return on invested capital is for all this AI infrastructure spend; so too in private markets, one must ask the difficult question of whether this unprecedented concentration around finding and funding AI killer apps will be money well spent or simply a replay of recent crypto euphoria. It is still not clear where most value is likely to accrue to – across the 3000 odd GenerativeAI start-ups vying for funding. But history tells us the application layer should be the winner. For now though, from our work, we see three likely power-law candidates. The first is breakthroughs in semiconductors and data centre efficiency technologies. The second is in funding foundational model builders. And the third, specifically in that application layer, we think the greatest chance is in the healthcare application space. Thanks for listening. If you enjoy the show, please leave us a review and share Thoughts on the Market with a friend or colleague today.*****Digital assets, sometimes known as cryptocurrency, are a digital representation of a value that function as a medium of exchange, a unit of account, or a store of value, but generally do not have legal tender status. Digital assets have no intrinsic value and there is no investment underlying digital assets. The value of digital assets is derived by market forces of supply and demand, and is therefore more volatile than traditional currencies' value. Investing in digital assets is risky, and transacting in digital assets carries various risks, including but not limited to fraud, theft, market volatility, market manipulation, and cybersecurity failures—such as the risk of hacking, theft, programming bugs, and accidental loss. Additionally, there is no guarantee that any entity that currently accepts digital assets as payment will do so in the future. The volatility and unpredictability of the price of digital assets may lead to significant and immediate losses. It may not be possible to liquidate a digital assets position in a timely manner at a reasonable price.Regulation of digital assets continues to develop globally and, as such, federal, state, or foreign governments may restrict the use and exchange of any or all digital assets, further contributing to their volatility. Digital assets stored online are not insured and do not have the same protections or safeguards of bank deposits in the US or other jurisdictions. Digital assets can be exchanged for US dollars or other currencies, but are not generally backed nor supported by any government or central bank.Before purchasing, investors should note that risks applicable to one digital asset may not be the same risks applicable to other forms of digital assets. Markets and exchanges for digital assets are not currently regulated in the same manner and do not provide the customer protections available in equities, fixed income, options, futures, commodities or foreign exchange markets. Morgan Stanley and its affiliates do business that may relate to some of the digital assets or other related products discussed in Morgan Stanley Research. These could include market making, providing liquidity, fund management, commercial banking, extension of credit, investment services and investment banking.

This week's Democratic National Convention in the US may be light on policy details, but our Global Head of Fixed Income and Thematic Research explains that the party's economic agenda is fairly clear as the elections draw closer.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about what investors need to know about U.S. political party conventions.It's Wednesday, Aug 21st at 10:30am in New York. This week, the Democratic Party is meeting in Chicago for its National Convention. Conventions for major political parties typically feature speeches from key policymakers, both past and present. So it would seem to be a forum where someone could learn what policies the party plans to implement if it takes control of the government following the November election. But you should expect more political messaging than policy signal.That's because the focus of these conventions tends to be more about persuading voters – and that means key policy details typically take a back seat to statements of political values widely shared by the party in order to send a consistent public message. In that sense, an observer may not learn much new about where there's party consensus on key policy details that markets care about, including specific new taxes that might be implemented, which tax breaks might be extended, how these choices might affect the deficit, and more. That in turn means we may not learn much about what policies could plausibly be implemented if Democrats win the White House and Congress in the November election. The good news is that we don't think a convention is required to have a good sense about this. We've previously done the work on the plausible policy path resulting from a Democratic victory by examining statements of elected officials and filtering for areas of consensus among Democratic lawmakers. And we've also looked at expected legislative catalysts in 2025 and 2026, such as the expiry of key provisions of the Tax Cuts and Jobs Act. In short, we think the plausible policy path resulting from Democrats sweeping the election would mean relative stability on trade and energy policy; and some deficit expansion driven by tax cut extensions only partially offset by new taxes on corporations and high income earners. Net-net, our economists think this outcome would create less uncertainty for the U.S. growth outlook than a Republican sweep, where potential for substantial new tariffs would interact with greater tax cut extensions and deficit expansion. And while we don't expect the convention will challenge our thinking here, we'll of course be tracking it and report back if it does. Thanks for listening. If you enjoy the podcast, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

Two South East Technological University (SETU) researchers have secured significant funding under the Department of Agriculture, Food and the Marine's (DAFM) latest Thematic Research Call. In July 2024, Minister Martin Heydon TD, Minter of State with special responsibility for Research and Development at the Department of Agriculture, Food and the Marine (DAFM), announced funding of €22.3 million for 21 new research projects. SETU researchers Dr Imelda Casey and Mr Kieran Sullivan have been awarded over €400,000 in funding under the call, which aims to support innovative research across various agricultural domains. Announcing the funding at an event held in Farmleigh House, Minister Martin Heydon TD stated, "Today I am announcing €22.3 million in grant aid for 21 new research projects arising from my department's 2023 Thematic Research Call. This will see research work being conducted across a wide range of areas, including low emissions dairy production, carbon sequestration in agricultural soils, developing farmland nature credits, optimising oat production and processing for healthy foods, assessing the impact of deer in forestry, advancing the Irish wool sector, sustainable packaging materials, and improving shelf life of dairy products, among others." Dr Imelda Casey, from SETU's Department of Land Sciences, is part of a project entitled 'Zero Zero; Low-emissions dairy production without fertiliser N or herbicides'. This project, led by James Humphreys of Teagasc in collaboration with SETU and the University of Galway, has been allocated €184,160. The project aims to extend the findings of the DAFM LOCAM project onto farms, to develop a low-emissions blueprint for fragmented dairy farms, seeking to enhance sustainability within the dairy industry by reducing dependency on synthetic fertilisers and herbicides. Dr Casey is pictured here with Prof Veronica Campbell, SETU President in September 2023, when she won the SETU Research Excellence award in the "Research Impact Award- policy and practice" category. Mr Kieran Sullivan, from the Walton Institute at SETU, is part of the AgNav project team. This collaborative effort is led by Teagasc and involves SETU, Bord Bia, the Irish Cattle Breeding Federation (ICBF) and is focused on creating a farmer-centric sustainability support framework. Led by Dr Indrakshi Dey, the Walton Institute will receive €225,723 to develop a disruptive framework for data analysis, interoperability and resilient data spaces to help the agricultural sector meet Climate Action Plan targets. The project team, which also includes Walton Institute colleague Christine O'Meara, will develop a toolkit of tailored farm sustainability support and solutions for Irish farmers. Speaking about the funding announcement, Dr Geraldine Canny, SETU Head of Research, said, "I wish to congratulate Dr Imelda Casey, Mr Kieran Sullivan, Dr Indrakshi Dey, and their project partners on this significant funding award. I'm excited to witness the transformative impact these projects will have on the agricultural sector. Sustainability in agriculture is a pressing issue, and these pioneering initiatives are crucial in advancing agricultural practices, particularly in climate mitigation, adaptation, and sustainable farming."

Our Global Head of Thematic and Fixed Income Research joins our Chief Fixed Income Strategist to discuss the recent market volatility and how it impacts investor positioning within fixed income. ----- Transcript -----Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research.Vishy: And I am Vishy Tirupattur, Morgan Stanley's Chief Fixed Income Strategist.Zezas: And on this episode of Thoughts on the Market, we'll talk about the recent market volatility and what it means for fixed income investors.It's Wednesday, August 7th at 10am in New York.Vishy, on yesterday's show, you discussed the recent growth of money market funds. But today I want to talk about a topic that's top of mind for investors trying to make sense of recent market volatility. For starters, what do you think tipped off these big moves across global markets?Vishy: Mike, a confluence of factors contributed to the volatility that we've seen in the last six or seven trading sessions. To be clear, in the last few weeks, there have been some downside surprises in incoming data. They were capped off by last Friday's US employment report that came in soft across the board. In combination, that raised questions on the soft-landing thesis that had been baked into market prices, where valuations were already pretty stretched. And this one came after a hawkish hike by Bank of Japan just two days prior.While Morgan Stanley economists were expecting it, this hike was far from consensus going in. So, what this means is that this could lead to a greater divergence of monetary policy between the Fed and the Bank of Japan. That is, investors perceiving that the Fed may need to cut more and sooner, and that Bank of Japan may need to hike more; in both cases, more than expected.As you know, when negative surprises show up together, volatility follows.Zezas: Got it. And so last week's soft US employment data raises the question of whether the Fed's overtightened and the US economy might be weaker than expected. So, from where you sit, how does this concern impact fixed income assets?Vishy: To be clear, this is really not our base case. Our economists expect US economy to slow, but not fall off the cliff. Last Friday's data do point to some slowing, on the margin more slowing than market consensus as well as our economists expected. And really what this means is the markets are likely to challenge our soft-landing hypothesis until some good data emerge. And that could take some time. This means recent weakness in spread products is warranted, and especially given tight starting levels.Zezas: So, it seems in the coming days and maybe even weeks, the path for total fixed income market returns is likely to be lower as the market adjusts to a weaker growth outlook. What areas of fixed income do you think are best positioned to weather this transition and why?Vishy: We really need more data to confirm or push back on the soft-landing hypothesis. That said, fears of growth challenges will likely build in expectations for more Fed cuts. And that is good for duration through government bonds.Zezas: And conversely, what segments of fixed income are most exposed to risk?Vishy: In one way or the other, all spread products are exposed. In my mind, the US corporate credit market recession risks are least priced into high yield single B bonds, where valuations are rich, and positioning is stretched.Zezas: So clearly the recent market volatility has affected global markets, not just the US and Japan. So, what are you seeing in other markets? And are there any surprises there?Vishy: Emerging market credit. In emerging market credit, investment grade sovereign bonds will likely outperform high yield bonds, causing us to close our preference for high yield versus investment grade. It is too soon to completely flip our view and turn bearish on the overall emerging market credit index.We do see a combination of emerging market single name CDSs as an attractive hedge. South Africa, Colombia, Mexico, for example.Zezas: So finally, where do we go from here? Do you think it's worth buying the dip?Vishy: Our message overall is that while there have been significant moves, it is not yet the time to buy on dips.Zezas: Well, Vishy, thanks for taking the time to talk.Vishy: Great speaking with you, Mike.Zezas: And as a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us wherever you listen. And share Thoughts on the Market with a friend or colleague today.

Markets are contending with greater uncertainty around the US presidential election following President Biden's withdrawal. Our Global Head of Fixed Income and Thematic Research breaks down what we know as the campaign enters a new phase.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the latest development in the US presidential race.It's Thursday, July 25th at 2:30 pm in New York. Last weekend, when President Biden decided not to seek re-election, it begged some questions from investors. First, with a new candidate at the top of the ticket, are there new policy impacts, and potential market effects, resulting from Democrats winning that we haven't previously considered? For the moment, we think the answer is no. Consider Vice President Harris. Her policy positions are similar to Biden's on key issues of importance to markets. And even if they weren't, the details of key legislative policies in a Democratic win scenario will likely be shaped by the party's elected officials overall. So, our guidance for market impacts that investors should watch for in the event that Democrats win the White House is unchanged. Second, what does it mean for the state of the race? After all, markets in the past couple of weeks began anticipating a stronger possibility of Republican victory. It was visible in stronger performance in small cap stocks, which our equity strategy team credited to investors seeing greater benefits in that sector from more aggressive tax cuts under possible Republican governance. It was also visible in steeper yield curves, which could reflect both weaker growth prospects due to tariff risks, pushing shorter maturity yields lower, and greater long-term uncertainty on economic growth, inflation, and bond supply from higher US deficits – something that could push longer-maturity Treasury yields relatively higher. So, it's understandable that investors could question the durability of these market moves if the race appeared more competitive. But the honest answer here is that it's too early to know how the race has changed. As imperfect as they are, polls are still our best tool to gauge public sentiment. And there's scant polling on Democratic candidates not named Biden. So, on the question of which candidate more likely enjoys sufficient voter support to win the election, it could be days or weeks before we have reliable information. That said, prediction markets are communicating that they expect the race to tighten – pricing President Trump's probability of regaining the White House at about 60-65 per cent, down from a recent high of 75-80 per cent. So bottom line, a change in the Democratic ticket hasn't changed the very real policy stakes in this election. We'll keep you informed here of how it's impacting our outlook for markets. Thanks for listening. If you enjoy the podcast, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

Financial markets can be sensitive to news cycles, but our Global Head of Fixed Income and Thematic Research offers a word of caution about reacting to recent headlines about the US presidential election.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about development in the upcoming US elections.It's Wednesday, July 17th at 10:30am in New York. Financial markets are starting to reflect the possibility of a Trump presidency. Investors may be taking cues from a few current developments. There's the recent weakening of President Biden's polling numbers in key swing states such as Pennsylvania, Michigan and Wisconsin. There's also the ongoing discussion about whether he will remain the Democratic nominee. And there's also former President Trump's increased win probabilities in prediction markets, as well as the perception that Democrats will have more trouble pursuing their agenda in the wake of the assassination attempt against him. To that end we've seen moves in key areas of markets sensitive to what we have argued will be the policy impacts of a Trump presidency, including a steepening of the US Treasury yield curve. But – a word of caution. These market reactions to recent political events may be rational, but it's not clear they're sustainable. First, there are plausible ways investors' perceptions of the likely outcomes of this election could shift. Voters can have very short memories, resulting in polls shifting to partisan priors. This happened with popular opinion on elected officials following notable incidents in recent years – such as the events of January 6th, 2021, the US withdrawal from Afghanistan, and more. Also, if President Biden were to withdraw as a candidate, it's possible investors could perceive that a different candidate could tighten the race. For example, there have been recent surveys showing alternate Democratic candidates polling better than President Biden. Second, there's also room for investors to misunderstand the policy path that could follow an election outcome as well as the impact of that path. For example, we've seen some recent press articles linking the broadening out of positive performance in the equity market to the likelihood of a Trump win on perceived benefits of friendlier tax policies that might result from this outcome. But if investors only focus on that policy, they're not incorporating the potential offsetting effects that could come from policies that could challenge the economic growth outlook, such as higher tariffs – something former President Trump has advocated for. So bottom line, it makes sense to interrogate what seems like clear links between the upcoming election and markets.Some linkages are strong, and it's possible that will make for a good investment strategy; others are weak and may break under scrutiny. We'll help you sort it out here. Thanks for listening. If you enjoy the podcast, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

U.S., French and Indian elections may have a minimal effect on equity markets, particularly in the short term, according to our Global Head of Fixed Income and our Chief Global Cross Asset Strategist.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research.Serena Tang: And I'm Serena Tang, chief Global Cross Asset Strategist,Michael Zezas: And on this episode of the podcast, we'll discuss what the elections in the US and Europe mean for global markets.It's Wednesday, July 9th at 10am in New York.As investors digest the results of the French election and anticipate the upcoming US presidential election, there's some key debates that are surfacing. And so I wanted to sit down with Serena to dig into these issues that are top of mind for investors.Serena, do you expect the upcoming US elections will impact markets in the run up to November?Serena Tang: Significantly, not likely -- because if we look at history, for stocks for example, in any election year, returns don't look significantly different from any other year.Serena Tang: My team ran some cross asset analysis on market behavior in and out of prior US elections using as much data as we have. And what has been very interesting is that whether a Democrat or Republican candidate eventually takes the White House, that doesn't change the trend of returns into an election.The form of the future elected government, whether it is divided or unified, that has also never really bothered stock markets before the vote. And you can see very, very similar patterns in bond yields, the dollar and gold. Now, what this means is that even if an investor has perfect foresight and know the results of the elections now, it won't necessarily give them an edge over the next few months.Serena Tang: Now, beyond the election is really when you see performance in various election outcome scenarios really diverge. So, whether the election was tight or not seemed to have led US rates to see very different levels of returns 12 months out from an election. Whether the outcome means a unified or divided government saw very large swings in gold prices.Now there are a lot of caveats. Every election is different. The economic conditions in every election is different. And as much as we talk about other historical periods, the truth is there aren't a lot of data points to work with. Data for S&P 500 going back to 1927 reaches the most far back among the major markets, but even then it only covers 23 presidential elections.So what I'm trying to say is there have been a lot of presidents, but there aren't a lot of precedents, at least for markets.Michael Zezas: The US election isn't the only election making headlines this year. For example, we just had an election in France that had a surprising result. How does the outcome there affect your outlook on the market?Serena Tang: It doesn't, in short. It doesn't change our bullish view on European equities at all. As you know, we have been constructive on that market since January and added significant exposure in our asset allocation then -- very much on the back of our European equity strategist Marina Zavolok coming out with an out of consensus bullish call for European stocks.Serena Tang: We like the market because of its cheap optionality and convexity. It has about 20 per cent revenue exposure to US but at much cheaper valuation. And it has about 20 per cent revenue exposure to EM, meaning should we get a growth surprise to the upside; you're geared to that but at much lower volatility than owning EM equities outright.Now, none of this has changed post French elections, and we also don't see significant increase in bearish tail risks. If you look at other markets like Euro IG corporate credit or the euro, those markets are suggesting risks in France are idiosyncratic, not systemic. So we maintain our overweight in European stocks.Serena Tang: Everything that I just said is also true for our bullish view on Indian equities, even after elections a month ago. Ridham Desai, head of India research, argued the election outcome there is likely to usher in more structural reforms and really reinforces our forecast of 20 per cent annual earnings growth over next five years, sustaining India's longest and strongest bull market ever. Bullish secular factors for Indian equities have not changed and therefore our bullish view on Indian equities have not changed.Michael Zezas: And elections have consequences for how countries interact with one another. And how their policies differ from one another. And one area of the markets that tend to be sensitive to this is the foreign exchange markets. So are there any impacts you're looking for around foreign currencies?Serena Tang: Yes, in particular, the dollar. But let me start with the euro first. Because I talked earlier about our bullish view on European equities; and in fact, in our asset allocation, we actually have a higher allocation to Europe versus US for stocks, bonds, and corporate credit bonds. The one European market we're more cautious on is the euro. And this actually has nothing to do with the French election results, per se -- because what matters now really is dollar strength. Now, part of this is a rates differential issue. Our US economics team are expecting the Fed to start cutting in September, while the ECB, of course, has already started easing policy. So yield differentials really favor the dollar here.But we also need to factor in the election, which seems to be the theme for today. Our FX [foreign exchange] strategy team thinks markets really need to start pricing in material likelihoods of dollar positive changes in US fiscal, foreign and trade policy as the election approaches. Meaning the dollar will continue its modest uptrend into the second half. And geopolitical uncertainty, of course, will also be dollar positive.Michael Zezas: So bottom line then. Elections clearly have consequences for markets but in the run-up to an election, there might not be a reliable pattern.Serena Tang: Exactly.Michael Zezas: Great. Well Serena, thanks for taking the time to talk.Serena Tang: Great speaking with you, Mike.Michael Zezas: And as a reminder, if you enjoy the podcast, please take a moment to rate and review us wherever you listen to podcasts and share Thoughts on the Market with a friend or colleague today.

Our Global Head of Fixed Income recaps the aftermath of the first U.S. presidential debate, and how markets may react if forthcoming poll data shows a meaningful shift in the race.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the US elections and its impact on markets.It's Tuesday, July 2nd at 10:30am in New York. For months, investors have been asking us when markets will start paying attention to the US presidential election. Well, we think that time arrived with last week's Presidential debate. The media coverage that followed revealed that many Democratic party officials became concerned about President Biden's ability to win the November election. This understandably led many to ask if the race for the White House had meaningfully changed; If it was no longer a close one – and if so, what would that mean for markets that might have to start pricing in the impacts of a Trump Presidency. On the first question: While we think it's too early to conclude that the race is no longer a close one, we expect some data in the next week or two that could clarify this. The few polls that have been released following the debate show that voters are increasingly concerned about Biden's ability to win; but they also show a level of support for Biden similar to what he enjoyed before the debates. What we haven't seen yet is a set of high-quality polls gauging swing state voter preferences. And even modest deterioration in Biden's support there could meaningfully boost Trump's prospects. That's because, going into the debate, polls showed former President Trump with a small but consistent lead in national and key swing state polls. Nothing outside the polling margin of error. But it still suggested that for President Biden to improve his odds of winning, he'd be served well by having a strong debate performance that moved the polls more in his favor. It doesn't appear that this has happened, and if polls show movement in the other direction for Biden, it would be fair to think of Trump as something of a favorite. But only for the time being. There'd still be time and catalysts for the race to change – including another scheduled debate in September. If we do end up with a race where Former President Trump is a more clear favorite, even if just for a short time, there could be reflections in the market. As we've previously discussed, a Trump win increases the chances of more of the expiring tax cuts being extended. The benefits of those cuts most clearly accrue to key sectors like energy and telecom, so there's potential outperformance there. In fixed-income – a steeper US Treasury yield curve is an outcome our macro strategy team is particularly attuned to. That's because a Trump presidency brings greater uncertainty about future fiscal policy, which could be reflected in relatively higher yields for longer maturity bonds. But it also increases the chances of policy choices that create near term pressure on economic growth that could push shorter maturity yields lower. This includes higher tariffs and tighter immigration policies. So bottom line, the markets are paying attention. And the race is sure to have many more twists and turns. We'll keep you updated on how we're navigating it. Thanks for listening. If you enjoy the podcast, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

Investors watching for market reactions would do well to stick to their existing plans in an environment where the economic impacts of any particular US election outcome remains unclear. Our Global Head of Fixed Income and Thematic Research explains.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the US elections and its impacts on markets.It's Tuesday, June 18th at 10:30am in New York. We first started covering the 2024 US election in December of last year. With about five months to go until the event, it's a good time to take stock of what we've learned that might be useful for investors. In short, there's a lot of noise around this election, and recognizing that noise is a first step toward not making mistakes around the event. First, don't make the mistake of confidently predicting an outcome. All indicators suggest it's very unlikely that we'll have a good sense about which candidate will win the election in the run up to the Election Day, and perhaps even in the days that follow. Neither candidate has a lead beyond a polling margin of error in sufficient states to suggest that if the election were held today that they would win the electoral college.Prediction markets and polling models also point to a race that's a toss-up. It all suggests a tight race going into Election Day. And with the sustained popularity of voting by mail, vote counts could move slowly, as they did in 2020; meaning we may have to dig in for another election week.Second, don't make the mistake of making big strategic changes in your portfolio just because it's an election year. We recently studied this and there's little pattern for how markets behave in the run up to an election, even when filtering for factors like similar outcomes and closeness of the race. Markets in the aggregate don't seem to consistently price in US election outcomes ahead of time. There's more evidence that they price in expected policy impacts once the outcome is known, which brings me to my third point.Don't make the mistake of overconfidence when it comes to how post-election policies will impact the economy. Sure, if we knew one outcome was bad for growth and the other good, it might be advisable to buy risk assets on the news of the latter outcome occurring. But especially in this election it's not that simple.For example, in scenarios where Republicans win the White House, you can expect greater tariffs, immigration curbs, and – if they also control congress – bigger deficits driven by tax cuts relative to alternative outcomes. According to our economists, these policies have different effects on growth, inflation and monetary policy depending on how they are constructed and timed; and so it defies simple conclusions of growth positive or growth negative, at least at this point.So bottom line, don't mistake noise for signal when it comes to the election. Stick to the plan, such as the cross-asset framework recently put forward in our mid-year outlook. And maybe focus on some equity sectors, such as industrials and defense, which are well placed currently but have upside in certain election scenarios.Thanks for listening. If you enjoy the podcast, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

The AI revolution has helped fuel the tech IPO sector's resurgence following a two-year lull. Our Co-Heads of Technology Equity Capital Markets join our Global Head of Fixed Income and Thematic Research to discuss the sustainability of this trend. ----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley.Diana Doyle: I am Diana Doyle, Managing Director and Co-Head of Technology Equity Capital Markets in the Americas.Lauren Garcia Belmonte: And I'm Lauren Garcia Belmonte, Managing Director, Co-Head of Technology Equity Capital Markets Americas.Michael Zezas: And on this episode of the podcast, we'll dive into what's ahead for the tech IPO market this year.It's Monday, June 17th, at 11 am in New York.Diana Doyle: And 8 am in San Francisco.Michael Zezas: Since 2023 only nine technology companies completed an initial public offering, which is one of the longest periods of reduced IPO activity in history. For context, compare that with the all-time record of 124 technology IPOs in 2021. But with the first quarter of 2024 behind us, we're starting to see that picture improve. With tech and AI in focus right now, on today's episode, I want to speak with Diana and Lauren from our global capital markets team to get their take on where the tech IPO environment might be headed and what investors may want to watch for.Lauren, maybe to start -- what's contributing to this resurgence in IPO activity this year?Lauren Garcia Belmonte: Well, the market backdrop has been constructive. We've had the SMP and NASDAQ trading up 10 -- 11 per cent this year and multiples have been stable for technology businesses. And against this backdrop, we've seen some IPO issuers recognize that this is a good environment in which to move forward with their IPO event. There are several benefits to becoming a public company, not just the opportunity to raise capital -- but to give liquidity to employees and to early investors in the business, and to set the company up to be a real industry leader as a public company.So, issuers are seeing the opportunity; and meanwhile, the demand side from investors has been encouraging as well. Investors in the public equities recognize that there's limited opportunity, in some instances, to underwrite growth. Right now, 55 per cent of publicly traded technology businesses are growing top line 10 per cent or less. So, the IPO opportunity, where companies generally have an attractive growth profile, is a way for these investors to get access to an opportunity to underwrite exciting growth profiles -- even when that opportunity isn't so prevalent in the public markets right now.Michael Zezas: And Diana, do you see the rebound in IPO activity as a durable trend? Maybe take us into 2025.Diana Doyle: Well, 2024 is definitely going to be better than 2022 and 2023. Now, it'll be a long time before we get back to that 124 tech IPOs in 2021 that you mentioned, Michael. But in an average year, we have about 35 to 40 IPOs, and we expect 2025 to approach more of an average. So, as Lauren said, we're encouraged by the breadth of investor demand for IPOs that we've done this year, and investors' appetite to take risk. And all that lays the foundation for a healthy IPO market in 12 to 18 months.But it will be a slow build because IPOs are not a quick turnaround financing. It takes about six months on average to get through an IPO process. So, if you're not already underway, you're likely looking at 2025. In the meantime, we're seeing many late-stage private companies. They have plenty of cash. They're doing secondary raises to provide liquidity to employees and early investors, and they're waiting for growth rates to be more predictable -- for profitability to improve and to get more scale.So, we're excited for 2025, and the IPO market is wide open for companies that have growth and scale, profitability and that offer investors something different than what's available in the public market today.Michael Zezas: Got it. And what about macro conditions, Lauren? So perhaps the Fed's pivoting to cutting rates, the overall economic backdrop, geopolitical considerations. How do those things impact the tech IPO market?Lauren Garcia Belmonte: Yeah, absolutely. The tech IPO market is influenced by these macro considerations -- and it's in a few different ways.First, of course, and importantly, the valuation impact is real for technology businesses that have a lot of their growth on the come and a higher rate environment. Of course, that future growth needs to be discounted more significantly. The second key impact is around just how these management teams are able to manage, predict, and model out their business.In a more uncertain environment, it can be more challenging to articulate and defend the forward model that is a part of all IPO processes where you're explaining to the research analysts and investors how your business will perform, as a public company. And, of course, management teams want to set their companies up for success as public companies -- and set up for a beat and raise cadence -- which can be difficult to do when you're dealing with an uncertain macro backdrop.I think one encouraging signal -- as much as we haven't seen the Fed cut as much as people had anticipated as would have happened at the start of this year -- is that the rate of change has slowed.So, the rate increase environment was one of the quickest that we've seen; and although we haven't seen the cuts as people had anticipated, I think it's encouraging that that rate of change has adjusted and that will allow for, hopefully, more predictability in businesses going forwardMichael Zezas: Got it. That connection between predictability and rates makes a lot of sense. And it seems that the market's particularly hungry for AI names. Diana, what AI related trends are you seeing?Diana Doyle: Well, AI is this black hole right now that's drawing all the energy and attention in the private markets. There's this huge enthusiasm because the technology is improving so quickly, and there's an uncertainty how long that rapid pace of advancement will continue. This cycle, in fact, is an exaggerated version of what we've seen in prior cycles, where the monetization typically accrues first to the semiconductors and hardware, then eventually to software. So right now, a lot of the investment is going into the semiconductors and hardware, the picks and shovels, and the fundamental model of research.But in software, there's still a lot to play out in private companies to create the type of profitable, proven business models that public market investors are looking for. There are big unknowns in how enterprises are going to reallocate spend in a world of AI, what happens with all the efficiency these new tools create, how a lower barrier to entry for software creation impacts margins.Michael Zezas: And aside from AI, Lauren, what other areas within tech are seeing more activity?Lauren Garcia Belmonte: I would say that these businesses aren't in a particular spot within the tech landscape, but rather have certain characteristics in that they share -- namely that they are in attractive markets.Additionally, being a market leader is of critical importance today. No longer do people want to back the third, fourth, fifth player in a market. I think people are really focused on market leadership. So that one or two spot is going to be really important. And investors are looking for businesses that are already scaled. That market leadership typically comes along with a certain scale qualifier. But that is absolutely going to be an important feature of the businesses that are successful transitioning from the private to public markets.These companies are in the software space and the internet side. So, there's a diversity of companies that have this in common, and that could be great IPO candidates on that timeline that Diana was mentioning.Michael Zezas: And finally, I'm curious how the political election cycle might have an impact on IPO activity during the rest of this year. Diana, what's your read?Diana Doyle: Well, we do expect to see some volatility in the pre-election window in the fall, like we do in every presidential election cycle. But what's different this time is that we have a pretty good sense, not only of who the candidates will be -- but also what their presidency is likely to look like and what policies they're likely to prioritize.So that de-risks the election as a market event materially versus prior cycles. And for the IPO market, any company that's been looking at an IPO in the second half of 2024 has already evaluated pulling it forward to hit the September-October time frame and get ahead of that likely market event.But there's a narrow window for anyone who hasn't yet pulled the trigger to accelerate. Before the holidays, post-election -- where some IPOs will be able to squeeze in. In practice, most of the companies that aren't already in the pipeline now -- have their eye on 2025.Michael Zezas: Okay, so, putting it all together, seems you're both pretty confident that there's going to be a durable pickup in IPO activity.Lauren Garcia Belmonte: That's right.Diana Doyle: Yes.Michael Zezas: Okay, great. So, our audience should stay tuned. Well, Diana, Lauren, thanks for taking the time to talk.Diana Doyle: Great speaking with you, Michael.Lauren Garcia Belmonte: Yes. Thank you for having us.Michael Zezas: And thanks for listening. If you enjoy Thoughts on the Market, please leave us a review wherever you listen, and share the podcast with a friend or colleague today.

Our Global Head of Fixed Income and Thematic Research reflects on Japanese investors' interest in the outcome of the upcoming presidential vote in the US.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the upcoming US elections.It's Wednesday, May 29th at 10:30am in New York.I recently returned from Tokyo, having attended and presented at Morgan Stanley's inaugural Japan summit. And while I was asked to present on topics ranging from our fixed income markets outlook to the role of Japan in an increasingly multipolar world, my one-on-one conversations always tracked back to the same client question: who will win the US election.Of course this is a matter of great importance globally. But the investor in Japan is particularly interested in whether possible election outcomes could disrupt their rosy economic outlook – either through new tariffs or increased geopolitical tensions between the US and China, and also North Korea. To that end, many were focused on polls showing former President Trump with sufficient support to win the election, asking how predictive this would be of the ultimate outcome. Here our view remains, for all investors, that polls aren't giving a reliable signal yet. The election is still several months away. And Trump doesn't have leads beyond a normal polling error in sufficient states to win the presidency. So, investors still need to consider the potential impacts of a variety of US electoral outcomes. That's perhaps not the most settling answer for investors, who strive to limit uncertainties. But we think it's the most honest one. And as we've been doing in this space all year, we'll continue to walk you through the outcomes, policy impacts, and resulting market effects you need to be aware of. Thanks for listening. If you enjoy the podcast, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

Our Global Head of Fixed Income and Thematic Research explains that the Biden administration's new tariffs on Chinese imports are narrower than those of 2018 and 2019, but still send a signal about the economic relationship between the US and China.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the impact of newly announced tariffs by the United States. It's Wednesday, May 15th at 10:30am in New York.Yesterday, the Biden administration announced new tariffs on the import of certain goods from China. These include semiconductors, batteries, solar cells and critical minerals among other products. For investors, this might remind them of the tariff escalation in 2018 and 2019 that led to global economic concerns. But we'd caution investors not to arrive at similar conclusions from this latest action.Consider that the scope of this action is far more muted than the tariffs actions from a few years ago. New tariffs will affect a projected $18 billion of imports, or only about 0.5 percent of all China's exports. And as our chief Asia economist Chetan Ahya has explained in his recent work, the sectors in scope for this round are areas where China has substantial spare capacity. Said differently, the tariffs are narrowly scoped and appear to be targeted at areas where the US perceives specific risk of imbalanced trade and market conditions. That contrasts with tariffs on roughly $360 billion of imports from China in the 2018-2019 period – a much broader approach that was in part aimed at forcing broad trade concessions from China but carried greater economic consequences by crimping corporate's capital spending globally as they re-evaluated their production strategies. There is some signal for investors here though. While the scope of the Biden administration's efforts here are more narrow, it does signal something we've known for a few years now. There's continuity across presidential administrations and across political parties in the US on the topic of the economic relationship with China. While each party has different tactics, there's clear overlap in their goals, in particular on the idea that the US must continue taking steps to protect critical and emerging technologies in order to preserve its economic and national security. This suggests that the laws of gravity won't apply to US tariffs any time soon, regardless of the US election outcome. So, the rewiring of the global economy in the emerging multipolar world will continue, and investors can still focus on some key regional beneficiaries of this secular trend – namely Mexico, India, and Japan.Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

Our Head of Europe Thematic Research discusses revolutionary “Longshot” technologies that can potentially alter the course of human ageing, and which of them look most investible to the market.----- Transcript -----Welcome to Thoughts on the Market. I'm Ed Stanley, Morgan Stanley's Head of Thematic Research in London. Along with my colleagues bringing you a variety of perspectives, today I'll discuss the promise of technology that might help us live longer and better lives. It's Friday, the 26th of April, at 2pm in London.You may have heard me discuss Moonshots and Earthshots on this podcast before. Moonshots are ambitious solutions to seemingly insurmountable problems using disruptive technology, predominantly software; while Earthshots, by contrast, are radical planet-focused technologies to accelerate decarbonization and mitigate global warming, predominantly hardware challenges.But today I want to address a third group of revolutionary solutions that I call Longshots. These are the most promising Longevity technologies. And in terms of the three big secular themes that Morgan Stanley is focused on – which are Decarbonization, Tech Diffusion, and Longevity – Longshots straddle the latter two. Unlike software-based Moonshots or hardware-based Earthshots, these Longshots face some of the greatest challenges of all. First, we know remarkably little about the process of ageing. Second, these are both hardware and software problems. And third, the regulatory hurdles are far more stringent in healthcare, when compared to most other emerging technology fields. We believe the success of Longshots depends on a deep understanding of Longevity. And loosely speaking, you can think of that as a question of whether someone's phenotype can outweigh their genotype. In other words, can their lifestyle, choices, environment trump the genetics that are written into their DNA.Modern medicine, by focusing almost exclusively on treating disease rather than preventing it, has succeeded in keeping us alive for longer – but also sicker for longer. Preventing disease increases our health spans and reduces morbidity, and its associated costs.So, in this regard, can we learn anything from the centenarians - the people who live to a hundred and beyond? They number around 30 people in every 100,000 of the population. And many of them live healthy lives well into their eighties. And what makes them so rare is they are statistically better at avoiding what the medical industry calls the Four Horsemen: coronary disease, diabetes, cancer and Alzheimer's. So, can Longshots help to replicate that successful healthy ageing story for a larger slice of the population?We look to technology for ways to delay the onset of these chronic diseases by 10 to 30 years, giving healthy life extension for all. That's not an outlandish goal in theory; but in practice we need a new approach to medical research. And we will be watching how the ten key Longshots we have identified play into this.Two of these Longshots are already familiar to our listeners: Diabesity medication and Smart Chemotherapy treatments, with a combined addressable market – according to our analysts – of a quarter of a trillion dollars. The other eight Longshots include AI-enabled drug discovery, machine vision embryo selection dramatically increasing the odds of fertility via IVF, bioprinting of organs, brain-computer Interfaces, CRISPR, DNA synthesis, robotics and psychedelics. In assessing the maturity and investibility of these ten Longshots, we find that obesity medication, smart chemo, and AI-assisted drug discovery are better understood by the market and look more investible. Many of the others are seeing material outcome- and cost-improvements but they remain earlier-stage, more speculative, particularly for public market investors.In contrast to Moonshots and Earthshots, where venture investors make up the lion's share of most of the early-stage capital, Longshots have substantially higher exposure to government agencies that make investments in early-stage healthcare projects. Governments are making hundreds of bets on Longshots in searches for solutions to reduce overall healthcare spending – or at the very least get a better return on that investment – which in 2023 amounted to $4.5 trillion in the US, and a whopping $10 trillion globally.Clearly, the stakes are very high, and the market opportunity is vast, particularly as AI technologies advance in tandem. And so, we'll keep you updated on the promise of these Longshots. Thanks for listening. If you enjoy the show, please leave a review and share Thoughts on the Market with a friend or a colleague today.

As the U.S. presidential election remains closely contested, our experts discuss what a change in administration could mean for European equities in terms of trade, China relations and other key issues.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research.Marina Zavolock: And I'm Marina Zavolock, Chief European Equity Strategist.Michael Zezas: And on this episode of Thoughts on the Market, we'll discuss how the U.S. election could impact European markets.It's Wednesday, April 24th at 10am in New York.Marina Zavolock: And 3pm in London.Michael Zezas: As the U.S. presidential election gets closer and the outcome remains highly uncertain, we're exploring the impact of a potential departure from the current status quo of President Biden in the White House. Today, my colleague Marina and I want to discuss just what that would mean for European equity markets.Marina, how closely is Europe following the election, and why?Marina Zavolock: So, European equities derive about 25 percent of their market cap weighted revenues from the U.S. And the U.S. is the largest export market for European firms outside of Europe. So, of course, interest in U.S. elections here is very high; and this is in terms of the exposures of European stocks, sectors, asset classes, and economics as a whole. European investors, I would say that their peak interest in U.S. elections was around the Republican primaries, and it's stayed elevated ever since.And Mike, I know you want to dig in specifically on how European markets would react in a change in status quo scenario. But first let's talk about your outlook on some of the key policies that may change if Biden loses the election. What are your thoughts on trade policy and tariffs?Michael Zezas: Trump's been clear about his view that countries levying higher tariffs on U.S. imports than the US levies on their imports is unfair, and he's willing to correct it with tariffs. And while in his term as president he focused more on China, he was interested in tariff escalation with Europe. But he reportedly was moved off that position by advisors and members of his own party who were wary of creating more noise in the transatlantic alliance. But this time around, the Republican party's views are much more aligned with Trump's. So, imports on European goods like autos could easily come into scope.Marina, how are you thinking about the impact of potentially higher tariffs on the European market? What sectors might be most affected?Marina Zavolock: The initial reaction to recent tariff related headlines we've been fielding from investors is around the risks to our bullish European equities view in particular. The general investor feedback we get is that European equities may continue to rally for now, but as we approach November and as we approach US elections, the downside risks from this event start to build.What our in-depth analysis demonstrates, however, is that it's far more nuanced than that. As I mentioned, Europe derives about 25 per cent of its weighted revenues from the US. But, when we've dug into that number, most of these revenues are in the form of services or local to local goods, meaning goods produced locally in the US and sold in the US -- but by European companies. Only about 6 per cent of Europe's overall weighted revenue exposure is to goods exported into the US. So, we find the risk is far more idiosyncratic from a change in tariff policy than broad based. And in terms of individual sectors most exposed to tariff risks, these include a lot of healthcare sectors -- med tech, life sciences, pharma, biotech -- aerospace as well, metals and mining; of course, autos as you mentioned, and a number of others.After tariffs, the Inflation Reduction Act (IRA) is the next most common policy area we get asked about in Europe, given relatively high exposures for European utilities, construction materials, and the capital goods sector.Overall, we find European equities aggregate exposure to IRA is also low, is less than 2 percent of weighted revenues, so even lower than that of tariffs. But the stocks most exposed in Europe to IRA are underperforming the rest of the market. What are your scenarios around the IRA if Trump wins, Mike?Michael Zezas: Well, we think the money appropriated in the IRA is here to stay. Many of that program's investments overlap with geographies represented by Republicans in Congress, which means repealing the IRA may be a better talking point than a political strategy -- similar to how Republicans in 2017 failed to repeal the Affordable Care Act despite campaigning on that as a priority. But Trump could certainly slow the spending of that money through regulatory means such as ratcheting up the rules about how much of the materials involved have to be sourced from within the US.Now switching gears, Marina, you mentioned the performance of European stocks related to our election scenarios. Based on your recent work, you have very granular stock level data on relative exposure to potential administration policies. How are stocks with the greatest exposures behaving overall?Marina Zavolock: Yeah, this was a very interesting conclusion from our work. We thought that it's still fairly early ahead of US elections for stocks to start to diverge on the basis of potential policy changes. But what we found when we surveyed our analysts and collected data for over 350 European stocks with material US exposure is that when we break out these exposures and we aggregate them, the stocks with the highest level of potential risk exposure to Trump administration policies are underperforming the overall market. And the stocks with the greatest potential positive exposure, to Trump administration policies are outperforming.And then you have groups like moderate exposure that are in the middle, and these groups, no matter how we slice the data for different policies, are lining up. Exactly as you might expect, depending on their level of exposure as the market starts to price in some probability of either scenario coming through. We're also starting to see the volatility of the stocks most exposed start to rise. But this is a very early trend.The other big area that we get asked about is China. So, Europe has about 8 per cent of its weighted revenues exposed to China. It's the highest of any major developed market region in the world. What are your expectations about China policy under a new Trump administration?Michael Zezas: Well, it's bipartisan consensus now that China is a rival and that more protective barriers to trade are needed to protect the US' tech advantage in order to safeguard US national and economic security. But like with Europe, Trump appears more willing to use tariffs as a tool in this rivalry, which can create more rhetorical and fundamental noise in the economic relationship.Marina, how do you think this would impact Europe?Marina Zavolock: So, we've been talking about China as a risk factor for some time for a variety of reasons, and recently when I mentioned that European stocks are starting to react to potential change in administration policies. This hasn't so much been the case on China exposures. China exposures are behaving as they were before. We're not seeing any great divergences as we approach elections; though in our overall model, we do favor sectors with lower exposure to China.Mike, and how are you thinking about Ukraine? We have a huge amount of interest in the defense sector, and it's one of the best performing sectors in Europe this year.Michael Zezas: Yeah. So here Trump's been pretty clear that he'd like to push for a rapid reconciliation between Russia and Ukraine. What investors should pay attention to is that a Trump attempt at rapid reconciliation, perhaps in contrast with the European approach. And then when you couple that with potential tariffs on Europe from the US, it can send a signal to Europe that they have to shift their own defense and economic strategy. And one manifestation of that could be greater security spending, particularly defense spending in Europe and globally. It's a key reason why defense is a sector we favor in both the US and Europe.So, Marina, what are some of the bottom-line conclusions for investors?Marina Zavolock: I think there's two main conclusions from our work. First, the aggregate exposures in Europe to potential changes in policy from a Trump administration are pretty low and quite idiosyncratic by stock. We talked about a few of the greatest exposure areas, but in aggregate, if we take all the policy areas that we've analyzed, net exposure of Europe's revenues is about 7 per cent.Second, the stocks that are most exposed, either positively or negatively, are already moving based on those relative exposures, and we think that will continue, and these groups of stocks will also have increased volatility as we get closer to November.Michael Zezas: Marina, thanks for taking the time to talk.Marina Zavolock: Great speaking with you, Mike.Michael Zezas: As a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us wherever you listen to podcasts; and share Thoughts on the Market with a friend or colleague today.Important note regarding economic sanctions. This research references country/ies which are generally the subject of comprehensive or selective sanctions programs administered or enforced by the U.S. Department of the Treasury's Office of Foreign Assets Control (“OFAC”), the European Union and/or by other countries and multi-national bodies. Any references in this report to entities, debt or equity instruments, projects or persons that may be covered by such sanctions are strictly informational, and should not be read as recommending or advising as to any investment activities in relation to such entities, instruments or projects. Users of this report are solely responsible for ensuring that their investment activities in relation to any sanctioned country/ies are carried out in compliance with applicable sanctions.

As global conflicts escalate, our Global Head of Fixed Income and Thematic Research unpacks the possible market outcomes as companies and governments seek to bolster security. ----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about current geopolitical tensions and their impact on markets.It's Wednesday, April 17th at 10:30 am in New York.Continued tensions in Middle East kept geopolitics in focus with clients this week. But markets seem to be shrugging off the recent escalation in the conflict, with relative stability in oil prices and equities. This implies some faith in the idea that the involved parties benefit from no further escalation – and will design responses to one another that won't lead to a broader conflict with bigger consequences. But obviously, this tricky dynamic bears watching, which we'll be doing. In the meantime, there's a key market theme that's underscored by these tensions. And that's the idea of Security as a secular market theme.This is a topic we've been collaborating with many research teams on, including Ed Stanley, our thematics analyst in Europe, and defense sector research teams globally. The idea here boils down to this. Russia's invasion of Ukraine, the US' increased rivalry with China, questions about the future of NATO, and of course the Middle East conflict, all reminds us that we're in a transition phase to a multipolar world where security is more tenuous. That requires a lot of spending by companies and governments to cope with this reality. In fact, we estimate that supply chains, food and health systems, IT, and more will require about $1.5 trillion of investment across the US and EU to protect against rising geopolitical risks. This means a lot more demand for global tech and industrials.And of course it means more demand for the defense sector. Regardless of whether US military aid plans continue to stall, there's news of increased spending in China, Canada, and Europe. Our head defense analyst in Europe, Ross Law, and our head European Economist Jens Eisenschmidt have looked at this in recent weeks. They argue there's scope for tens of billions of euros in extra spend annually in Europe, with a greater geopolitical shock putting that number into the hundreds of billions. It's a key reason our equity research colleagues favor the US and EU defense sectors.Bottom line, geopolitical events continue to reflect the transition to a multipolar world. And as companies and governments seek security in this world, there will be market impacts. We'll be tracking them here.Thanks for listening. Subscribe to Thoughts on the Market on Apple Podcasts, or wherever you listen, and leave us a review. We'd love to hear from you.

Our Global Chief Economist joins our Head of Fixed Income Research to review the most recent Consumer Price Index data, and they lay out potential outcomes in the upcoming U.S. elections that could impact the course of inflation's trajectory. ----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research.Seth Carpenter: And I'm Seth Carpenter, Global Chief Economist.Michael Zezas: And on this special episode of Thoughts on the Market, we'll be taking a look at how the 2024 elections could impact the outlook for inflation.It's Wednesday, April 10th at 4pm in New York.Seth, earlier this morning, the US Bureau of Labor Statistics released the Consumer Price Index (CPI) data for March, and it's probably an understatement to say it's been a much-anticipated report -- because it gives us some signal into both the pace of inflation and any potential fed rate cut path for 2024. I want to get into the longer-term picture around what the upcoming US election could mean for inflation. But first, I'd love your immediate take on this morning's data.Seth Carpenter: Absolutely, Mike. This morning's CPI data were absolutely critical. You are right. Much anticipated by markets. Everyone looking for a read through from those data to what it means for the Fed. I think there's no two ways about it. The market saw the stronger than expected inflation data as reducing the likelihood that the Fed would start cutting rates in June.June was our baseline for when the Fed would start cutting rates. And I think we are going to have to sharpen our pencils and ask just how much is this going to make the Fed want to wait? I think over time, however, we still see inflation drifting down over the course of this year and into next year, and so we still think the Fed will get a few rate hikes in.But you wanted to talk longer term, you wanted to talk about elections. And when I think about how elections could affect inflation, it's usually through fiscal policy. Through choices by the President and the Congress to raise taxes or lower taxes, and by choices by the Congress and the President to increase or decrease spending.So, when you think about this upcoming election, what are the main scenarios that you see for fiscal policy and an expansion, perhaps, of the deficit?Michael Zezas: Yeah, I think it's important to understand first that the type of election outcome that historically has catalyzed a deficit expansion is one where one party gets complete control of both the White House and both chambers of Congress.In 2025, what we think this would manifest in if the Democrats had won, is kind of a mix of tax extensions, as well as some spending items that they weren't able to complete during Biden's first term -- probably somewhat offset by some tax increases. On net, we think that would be incremental about $500 billion over 10 years, or maybe $40 [billion] to $50 billion in the first year.If Republicans are in a position of control, then we think you're looking at an extension of most of the expiring corporate tax cuts -- expire at the end of 2025 -- that is up to somewhere around a trillion dollars spread over 10 years, or maybe a hundred to $150 billion in the first year.Seth Carpenter: So, what I'm hearing you say is a wide range of possible outcomes, because you didn't even touch on what might happen if you've got a split government, so even smaller fiscal expansion.So, when I take that range from a truly modest expansion, if at all, with a split government, to a slight expansion from the Democrats, a slightly bigger one from a Republican sweep, I'm hearing numbers that clearly directionally should lead to some inflationary pressures -- but I'm not really sure they're big enough to really start to move the needle in terms of inflationary outcomes.And I guess the other part that we have to keep in mind is the election's happening in November of this year. The new president, if there's a new president, the new Congress would take seats in the beginning of the year next year. And so, there's always a bit of a lag between when a new government takes control and when legislation gets passed; and then there's another lag between the legislation and the outcome on the economy.And by the time we get to call it the end of 2025 or the beginning of 2026, I think we really will have seen a lot of dissipation of the inflation that we have now. So, it doesn't really sound like, at least from those baseline scenarios that we're talking about a huge impetus for inflation. Would you think that's fair?Michael Zezas: I think that's fair. And then it sort of begs the question of, if not from fiscal policy, is there something we need to consider around monetary policy? And so around the Fed, Chair Powell's term ends in January of 2026 -- meaning potential for a new Fed chair, depending on the next US president.So, Seth, what do you think the election could mean for monetary policy then?Seth Carpenter: Yeah, that's a great question, Mike. And it's one that, as you know well, we tend to get from clients, which is why you and I jointly put out some research with other colleagues on just what scope is there for there to be a -- call it particularly accommodative Fed chair under that Republican sweep scenario.I would say my take is -- not the biggest risk to worry about right now. There are two seats on the Federal Reserve Board that are going to come open for whoever wins the election as president to appoint. That's the chair, clearly very important. And then one of the members of the Board of Governors.But it's critical to remember there's a whole committee. So, there are seven members of the Board of Governors plus five voting members, across the Federal Reserve Bank presidents. And to get a change in policy that is so big, that would have massive inflationary impacts, I really think you'd have to have the whole committee on board. And I just don't see that happening.The Fed is set up institutionally to try to insulate from exactly that sort of, political influence. So, I don't think we would ever get a Fed that would simply rubber stamp any president's desire for monetary policy.Michael Zezas: I think that makes a lot of sense. And then clients tend to ask about two other concerns; with particularly concerns with the Republican sweep scenario, which would be the impact of potentially higher trade tariffs and restrictions on immigration. What's your read here in terms of whether or not either of these are reliable in terms of their impact on inflation?Seth Carpenter: Yeah, super topical. And I would say at the very least, we have some experience now with tariff policy. And what did we see during the last episode where there was the trade war with China? I think it's very natural to assume that higher tariffs mean that the cost of imported goods are going to be higher, which would lead to higher inflation; and to some extent that was true, but it was a much smaller, much more muted effect than I think you might otherwise assume given numbers like 25 per cent tariffs or has been kicked around a few times, maybe 60 per cent tariffs. And the reason for that change is a few things.One, not all of the goods being brought in under tariffs are final consumer goods where the price would just go straight through to something like the CPI. A lot of them were intermediate goods. And so, what we saw in the last round of tariffs was some disruption to US manufacturing, disruption to production in the United States because the cost of production went up.And so, it was as much a supply shock as it was anything else. For those final consumer goods, you could see some pass through; but remember, there's also the offset through the exchange rate, that matters a lot. And, consumers, they have a willingness to pay, or maybe a willingness not to pay, and so, sellers aren't always able to pass through the full cost of the tariffs. And so, as a result, I think the net effect there is some modestly higher inflation, but really, it's important to keep in mind that hit to economic activity that, over time, could actually go in the opposite direction and be disinflationary.Immigration, very different story, and it has been very much in the news recently. And we have seen a huge surge in immigration last year. We expect it to continue this year. And we think it's contributing to the faster run rate that we've seen in the economy without continued inflationary pressure. So, I think it's a natural question to ask -- if immigration was restricted, would we see labor shortages? Would that drive up inflation? And the answer is maybe.However, a few things are really critical. One, the Fed is still in restrictive territory now, and they're only going to start to lower rates if and when we see inflation come down. So the starting point will matter a lot. And second, when we did our projections, we took a lot of input from where the CBO's estimates are, and they've already been assuming that immigration flows really start to normalize a bit in 2025 and a lot more in 2026. Back to run rates that are more like pre-COVID rates. And so, against that backdrop, I think a change in immigration policy might be less inflationary because we'd already be in a situation where those flows were coming down.But that's a good time for me to turn things around, Mike, and throw it right back to you. So, you've been thinking about the elections. You run thematic research here. I've heard you say to clients more than once that there is some scope, but limited scope for macro markets to think about the outcome from the election, but lots of scope from a micro perspective. So, if we were thinking about the effect of the election on equity markets, on individual sectors, what would be your early read on where we should be focusing most?Michael Zezas: So we've long been saying that the reliable market impacts from this election, at least this far out, appear to be more micro than macro. And so, for example, in a Republican sweep scenario, we feel pretty confident that there would be a heavier skew towards extending corporate tax cut provisions that are expiring at the end of 2025.And if you look at who benefits fundamentally from those extensions, it tends to be companies that do more business domestically in the US and tend to be a bit smaller. Sectors that tend to come in the scope include industrials and telecom; and in terms of size of company, it tends to skew more towards small caps.Seth Carpenter: So, I can see that, Mike, but let me make it even more provocative because a question I have got from clients recently is the Inflation Reduction Act (IRA), which in lots of ways is helping to spur spending on infrastructure, is helping to spur spending on green energy transition. What's the chance that that gets repealed if the outcome, if the election goes to Trump?Michael Zezas: We see the prospects for the IRA to get repealed is quite limited, even in a Republican sweep scenario. The challenge for folks who might not want to see the law exist anymore is that many of the benefits of this law have already been committed; and the geographic area where they've been committed overlays with many of the districts represented by Republicans, who would have to vote for its repeal. And so, they might be voting against the interests of their districts to do that. So, we think this policy is a lot stickier than people perceive. The campaign rhetoric will probably be, pretty elevated around the idea of repealing it; but ultimately, we think most of the money behind the IRA will be quite durable. And this is something that should accrue positively to the clean tech sector in particular.Seth Carpenter: Got it. Well, Mike, as always, I love being able to take time and talk to you.Michael Zezas: Seth, likewise, thanks for taking the time to talk. And as a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple podcast app. It helps more people find the show.

Experts from our research team discuss how tensions with China could limit US access to essential technologies and minerals.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research.Ariana Salvatore: And I'm Ariana Salvatore from the US Public Policy Research Team.Michael Zezas: And on this episode of the podcast, we'll discuss how tensions in the US-China economic relationship could impact US attempts to transition to clean energy.It's Thursday, April 4th at 10am in New York.Ariana, in past episodes, I've talked about governments around the world really pushing for a transition to clean energy, putting resources into moving away from fossil fuels and moving towards more environmentally friendly alternatives. But this transition won't be easy. And I wanted to discuss with you one challenge in the US that perhaps isn't fully appreciated. This is the tension between US climate goals and the goal of reducing economic links with China. So, let's start there.What's our outlook for tensions in the near term?Ariana Salvatore: So, first off, to your point, the world needs over two times the current annual supply of several key minerals to meet global climate pledges by 2030. However, China is a dominant player in upstream, midstream, and downstream activities related to many of the required minerals.So, obviously, as you mentioned, trade tensions play a major role in the US ability to acquire those materials. We think friction between the US and China has been relatively controlled in recent years; but we also think there are a couple factors that could possibly change that on the horizon.First, China's over-invested in excess manufacturing capacity at a time when domestic demand is weak, driving the release of extra supply to the rest of the world at very low prices. That, of course, impacts the ability of non-Chinese players to compete. And second, obviously a large focus of ours is the US election cycle, which in general tends to bring out the hawk in both Democrats and Republicans alike when it comes to China policy.Michael Zezas: Right. So, all of that is to say there's a real possibility that these tensions could escalate again. What might that look like from a policy perspective?Ariana Salvatore: Well, as we established before, both parties are clearly interested in policies that would build barriers protecting technologies critical to US economic and national security. These could manifest through things like additional tariffs, as well as incremental non-tariff barriers, or restrictions on Chinese goods via export controls.Now, importantly, this could in turn cause China to act, as it has done in the recent past, by implementing export bans on minerals or related technology -- key to advancing President Biden's climate agenda, and over which China has a global dominant position.Specifically on the mineral front. China dominates 98 per cent of global production of gallium, more than 90 per cent of the global refined natural graphite market, and more than 80 per cent of the global refined markets of both rare earths and lithium. So, we've noted that those minerals are at the highest risk of disruption from potential escalation intentions.But Michael, from a market's perspective, are there any sectors that stand out as potential beneficiaries from this dynamic?Michael Zezas: So, our research colleagues have flagged that traditional US autos would see mostly positive implications from this outcome as EV penetration would likely stagnate further in the event of higher trade tensions. Similarly, US metals and mining stocks would likely benefit on the back of increased support from the government for US production, as well as increased demand for locally sourced materials.On the flip side, Ariana, any clear risks that our analysts are watching for?Ariana Salvatore: Yeah, so a clear impact here would be in the clean tech sector, which faces the greatest risk of supply chain disruption in an environment with increasing trade barriers in the alternative energy space. And that's mainly a function of the severe dependencies that exist on China for battery hardware. Our analysts also flagged US large scale renewable energy developers for potential downside impacts in this scenario -- again, specifically due to their exposure to battery and solar panel supply chains, most of which stems from China domiciled industries.Michael Zezas: Makes sense and clearly another reason we'll have to keep tracking the US-China dynamic for investors. Ariana, thanks for taking the time to talk.Ariana Salvatore: Great speaking with you Mike.Michael Zezas: And thanks for listening. If you enjoy Thoughts on the Market, please leave us a review wherever you listen to the show and share the podcast with a friend or colleague today.

Consumer credit scores have ticked higher in the last two years – but so have the rate of delinquencies and defaults. Our Global Head of Fixed Income discusses “credit score migration” with the firm's Asset-Backed Security Strategist.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley.Heather Berger: And I'm Heather Berger, Asset-Backed Security Strategist.Michael Zezas: And today, we'll be talking about the trend of migrating US consumer credit scores and the potential effect on equities and fixed income. It's Wednesday, March 27th at 10am in New York.Heather, I really wanted to talk to you today because we've all seen some recent news reports about delinquencies and defaults in consumer credit ticking higher over the last two years. That means more people missing payments on their car loans and credit cards, suggesting the consumer is increasingly in a stressed position. But at the same time, that seems to be at odds with what's been an upward trend in consumers' credit scores, which on its face should suggest the consumer is in a healthier position.So, it all begs the question: what's really going on here with the consumer, and what does it mean for markets? Now, you and your colleagues have been doing some really fascinating work showing that in order to get to the truth here, we have to understand that there's a measurement problem. There's quirks in the data that, when you understand them, mean you have a more accurate picture of the health of the consumer. And that, in turn, can clarify some opportunities in the fixed income and equity markets.So, this measurement problem seems to center around the idea of credit score migration. Can you start by explaining what exactly is credit score migration?Heather Berger: Sure. So, credit scores are used as a way to estimate expected default risk on consumer loans. And these scores are really the most standardized and widespread way of evaluating consumer credit quality. Scores are meant to be relative metrics at any point in time. So, a 700 score today is meant to indicate less default risk than a 600 score today, but a 700 score today isn't necessarily the same as a 700 score a few years ago.Credit scores have been increasing throughout the past decade; most extremely from 2020 to 2021, largely due to COVID related factors such as stimulus checks. The average credit score is up 10 points in the past four years, and this trend has broadly been referred to as credit score migration.Michael Zezas: So, just so we can have a concrete example, can you talk about how this has affected one particular consumer credit category?Heather Berger: Well, as you mentioned earlier, delinquencies and defaults have been rising across consumer loan types, whether it's autos, credit cards, or personal loans. The macro backdrop has definitely contributed to this, as inflation has weighed on consumers real disposable income, but we do think that score migration has had an impact as well, considering the large changes over the past few years.Looking at auto loans, for example, with the same credit scores from 2022 versus loans from 2018, we see that delinquency rates on the 2022 loans are up to 60 per cent higher than on the 2018 loans. We estimate that 30 to 50 per cent of this increase can be due to effects of credit score migration.Michael Zezas: And is there anything we can assume here about the actual health of the US consumer? Do we see delinquencies improving or getting worse?Heather Berger: I think one of the main takeaways here is that since score migration impacts performance metrics, we shouldn't necessarily extrapolate delinquency data to broader consumer health. Despite the high delinquency rates, our economists do expect consumers to remain afloat.They're forecasting a modest slowdown in consumer spending this year as we move off a hot labor market and continue to face elevated interest rates.Michael Zezas: So, let's shift to the market impacts here. Maybe you could tell us what your colleagues in equity research saw as the impact on the banks and consumer finance sectors. And in your area of expertise, what are the impacts for asset-backed securities?Heather Berger: We think that across both of these spaces, taking into account changes in credit scores will be important to use in models moving forward; and this can help us to more accurately assess the risks of consumer loans and to predict performance. Movements in credit scores have actually been muted in the past year, which is a big change from the large increases we saw a few years ago.So, score migration should now have a smaller impact on consumer performance and delinquency rates. This means that performance will be driven by macro factors and lending standards. As inflation comes down and with lending standards tight, we view this as a positive for asset backed securities, and our colleagues view it as a positive for their coverage of consumer finance equities.Michael Zezas: Heather, this has been really insightful. Thanks for taking the time to talk.Heather Berger: Great speaking with you, Michael.Michael Zezas: And thanks for listening. If you enjoy thoughts on the market, please be sure to rate and review us on the Apple podcast app or wherever you listen. It helps more people find the show.

Our Global Head of Fixed Income and Thematic Research outlines the potential impact the upcoming U.S. elections could have on increasing treasury yields, US-China policy and Japan's current trajectory.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about overseas investors' view on the US election. It's Wednesday, Mar 20th at 10:30 am in New York. I was in Japan last week. And as has been the case with other clients outside the US, the upcoming American elections were a key concern. To that end, we're sharing the three most frequently asked questions, as well as our answers, about the impact of the U.S. election on markets coming from clients outside the US.First, clients are curious what the election could mean for what's recently been a very rosy outlook for Japan. The central bank is taking steps toward normalizing monetary policy which, combined with corporate reforms, is driving renewed investment. And it doesn't hurt that multinationals are finding it more challenging to do new business in China due to U.S. policy restrictions. In our view, regardless of the election outcome, these positive secular trends will continue. While its true that Republicans are voicing greater interest in tariffs on US friend and foe alike, in our view there are other geographies more likely to bear the impact of stricter trade policy from the US – such as Europe, Mexico, and China; areas where there's clearer overlap between US trade interests and the geopolitical preferences of the Republican party.Second, clients wanted to know what the election would mean for US-China policy. The first thing to understand is that both parties are interested in policies that build barriers protecting technologies critical to US economic and national security. For Democrats, this has meant a focus on extending non-tariff barriers such as export and investment restrictions; many of which end up affecting the trade relationship between the US and China, and over time have resulted in US direct investment tilting away from China and toward the rest of the world. Republicans support these policies too. But key party leaders, including former President and current candidate Trump, also want to use tariffs as a tool to negotiate better trade agreements; and, potentially as a fall back, to harmonize tariff levels between countries. So, the election is unlikely to yield an outcome that eases trade tension between the US and China. But an outcome where Republicans win could create more volatility for global trade flows and corporate confidence, creating more economic uncertainty in the near term. Third and finally, clients wanted to know if there were any election outcomes that would reliably change the trajectory of US growth, inflation, and accordingly the trajectory for treasury yields. In particular there was interest in outcomes that could cause yields to move higher. Our take here is that there's been no solidly reliable outcome that points in that direction -- at least not yet. While it's likely that a potential Trump presidency would favor tax cuts and tariffs, it's not clear that either of these definitively lead to inflation. Cutting taxes for companies with healthy balance sheets doesn't necessarily yield more investment. Tariffs increase the cost of the thing being tariffed, but that could lead to prices of other goods in the economy suffering from weaker demand. Relatedly, the idea that a more dovish Fed could enable inflation is not a foregone conclusion because – as we've discussed on prior episodes – the President's ability to influence monetary policy is more limited than you might think.Still, because of the pileup of these factors, it wouldn't be surprising to see rates rise at some point this year on election risk perceptions. But it's not clear this would be a sustained move, and so it's not causing us yet to recommend clients' position for it. For clients looking for more reliable market moves from the election, we're still focused on key sectoral impacts: sectors like industrials and telecom which could benefit from tax cuts in a Republican win scenario; and sectors like clean tech which benefit in a Democratic win scenario, on greater certainty for the spend of energy transition money in the IRA. Of course, as markets change and price in different outcomes, interesting macro markets opportunities will emerge -- and we'll be here to tell you all about it.Thanks for listening. Subscribe to Thoughts on the Market on Apple Podcasts, or wherever you listen, and leave us a review. We'd love to hear from you.

Our Global Head of Fixed Income shares some startling data on decarbonization, the widespread use of AI and longevity. ----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about key secular themes impacting markets.It's Wednesday, Mar 6th at 10:30 am in New York.We kicked off 2024 by highlighting the three secular themes we think will make the difference between being ahead of or behind the curve in markets – longevity, AI tech diffusion, and decarbonization. How's it going so far? We've got some initial insights and opportunities at the sector level worth sharing, and here they are through the lens of three big numbers.The first number is €5 trillion – that's how much our global economics and European utilities teams estimate will be spent in Europe by 2030 on efforts to decarbonize the energy system. These attempts will boost both growth and inflation, though by how much remains unclear. A more concrete investment takeaway is to focus on the sectors that will be on the receiving end of decarbonization spending: utilities and grid operators.The second set of numbers are US$140 billion and US$77 billion – these are our colleagues' total addressable market projections for smart-chemo, over the next 15 years, and obesity treatments, by 2030. In terms of our longevity theme, we see companies increasingly investing in and achieving breakthroughs that can extend life. While the theme will have myriad macro impacts that we're still exploring, the tangible takeaway here is that there are clear beneficiaries in pharma to pursue.The last number we're focusing on is US$500 billion. That's the opportunity associated with a fivefold increase in the size of the European data center market out to 2035. That should be driven by the need to ramp up to deal with key tech trends, like Generative AI.So, while those numbers drive some pretty clear equity sector takeaways, the macro market implications are somewhat more complicated. For example, on longevity, a common client question is whether health breakthroughs will have a beneficial impact for bond investors by shrinking fiscal deficits. Among US investors, for example, one theory is that breakthroughs in preventative care will reduce Medicare and Medicaid spending. But even if that proved true, we still have to consider potential offsetting effects, such as whether new healthcare costs will arise. After all, if people are living longer, more active lives, they might need more of other types of healthcare, like orthopedic treatments. Simply put, the macro market impacts are complicated, but critical to understand. We remain on the case. In the meantime, there's clearer opportunities from our big themes in utilities, pharma, and other key sectors.Thanks for listening. Subscribe to Thoughts on the Market on Apple Podcasts, or wherever you listen, and leave us a review. We'd love to hear from you.

As the deadline to fund the government rapidly approaches, Michael Zezas explains what economic effect a possible shutdown could have and whether investors should be concerned. ----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the market impacts of a potential US government shutdown.It's Wednesday, February 28th at 2pm in New York.Here we go again. The big effort in Washington D.C. this week is about avoiding a government shutdown. The deadline to pass funding bills to avoid this outcome is this weekend. And while many investors tell us they're fatigued thinking about this issue, others still see the headlines and understandably have concerns about what this could mean for financial markets. Here's our quick take on it, specifically why investors need not view this as a markets' catalyst. At least not yet.In the short term, a shutdown is not a major economic catalyst. Our economists have previously estimated that a shutdown shaves only about .05 percentage points off GDP growth per week, and the current shutdown risk would only affect a part of the government. So, it's difficult to say that this shutdown would mean a heck of a lot for the US growth trajectory or perhaps put the Fed on a more dovish path – boosting performance of bonds relative to stocks. A longer-term shutdown could have that kind of impact as the effects of less government money being spent and government employees missing paychecks can compound over time. But shutdowns beyond a few days are uncommon.Another important distinction for investors is that a government shutdown is not the same as failing to raise the debt ceiling. So, it doesn't create risk of missed payments on Treasuries. On the latter, the government is legally constrained as to raising money to pay its bills. But in the case of a shutdown, the government can still issue bonds to raise money and repay debt, it just has limited authority to spend money on typical government services. So then should investors just simply shrug and move on with their business if the government shuts down? Well, it's not quite that simple. The frequency of shutdown risks in recent years underscores the challenge of political polarization in the U.S. That theme continues to drive some important takeaways for investors, particularly when it comes to the upcoming US election. In short, unless one party takes control of both Congress and the White House, there's little domestic policy change on the horizon that directly impacts investors. But one party taking control can put some meaningful policies into play. For example, a Republican sweep increases the chances of repealing the inflation reduction act – a challenge to the clean tech sector. It also increases the chances of extending tax cuts, which could benefit small caps and domestic-focused sectors. And it also increases the chances of foreign policies that might interfere with current trends in global trade through the levying of tariffs and rethinking geopolitical alliances. That in turn creates incentive for on and near-shoring…an incremental cost challenge to multinationals.So, we'll keep watching and keep you in the loop if our thinking changes. Thanks for listening. Subscribe to Thoughts on the Market on Apple Podcasts, or wherever you listen, and leave us a review. We'd love to hear from you.

Our Head of Thematic Research in Europe previews the possible next phase of the AI revolution, and what investors should be monitoring as the technology gains adoption.----- Transcript -----Welcome to Thoughts on the Market. I'm Edward Stanley, Morgan Stanley's Head of Thematic Research in Europe. Along with my colleagues bringing you a variety of perspectives, today I'll discuss the latest developments around AI Adopters. It's Tuesday, February the 20th, at 2pm in London.The current technology shift driven by AI is progressing faster than any tech shift that came before it. I came on the show at the beginning of the year to present our thesis – while 2023 was the “Year of the Enablers,” those first line hardware and software companies; 2024 is going to be the “Year of the Adopters,” companies leveraging the Enablers' hardware and software to better use and monetize their own data for this generative AI world.And the market is still sort of treating this as a “show me” story. Enablers are still driving returns. Around half of the S&P's performance this year can be attributed to three Enabler stocks. Yet, be it Consumer or – more importantly – Enterprise adoption, monthly data we're tracking suggests AI adoption is continuing at a rapid pace.So let me paint a picture of what we're actually seeing so far this year.There has been a widening array of consumer-facing chatbots. Some better for general purpose questions; some better at dealing with maths or travel itineraries; others specialized for creating images or videos for influencers or content creators. But those proving to be the stickiest, or more importantly leading to major behavioral day-to-day changes, are coding assistants, where the productivity upside is now a well-documented greater than 50 per cent efficiency gain.From a more enterprise perspective, open-source models are interesting to track. And we do, almost daily, to see what's going on. The people and companies downloading these models are likely to be using them as a starting point – for fine-tuning their own models.Within that, text models which form the backbone of most chatbots you will have interacted with, now account for less than 50 per cent of all models openly available for download. What's gaining popularity in its place is multi-modal models. This is: models capable of ingesting and outputting a combination of text, image, audio or video.Their applications can range from disruption within the music industry, personalized beauty advice, applications in autonomous driving, or machine vision in healthcare. The list goes on and on. The speed of AI diffusion into non-tech sectors is really bewildering.Despite all these data points, suggesting consumer and enterprise adoption is progressing at a rapid clip, Adopter stocks continue to underperform those picks-and-shovels Enablers I mentioned. The Adopters have re-rated modestly in the first month and a half of the year – but not the whole group. Of course, this is a rapidly changing landscape. And many companies have yet to report their outlook for the year ahead. We'll continue to keep you informed of the newest developments as the years progress.Thanks for listening. If you enjoy the show, please leave a review on Apple Podcasts and share Thoughts on the Market with a friend or a colleague today.

Michael Zezas, Global Head of Fixed Income and Thematic Research, gives his take on how the U.S. election may influence European policy on national security, with implications for the defense and cybersecurity sectors.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the impact of the US election on global security and markets. It's Thursday, February 15th at 3pm in New York.Last week I was in London, spending time with clients who – understandably – are starting to plan for the potential impacts of the US election. A common question was how much could change around current partnerships between the US and Europe on national security and trade ties, in the event that Republicans win the White House. The concern is fed by a raft of media attention to the statements of Republican candidate, Former President Trump, that are skeptical of some of the multinational institutions that the US is involved in – such as the North Atlantic Treaty Organization, or NATO. Investors are naturally concerned about whether a new Trump administration could meaningfully change the US-Europe relationship. In short, the answer is yes. But there's some important context to keep in mind before jumping to major investment conclusions.For example, Congress passed a law last year requiring a two-thirds vote to affirm any exit from NATO, which we think is too high a hurdle to clear given the bipartisan consensus favoring NATO membership. So, a chaotic outcome for global security caused by the dissolution of NATO isn't likely, in our view.That said, an outcome where Europe and other US allies increasingly feel as if they have to chart their own course on defense is plausible even if the US doesn't leave NATO. A combination of President Trump's rhetoric on NATO, a possible shift in the US's approach to the Russia-Ukraine conflict, and the very real threat of levying tariffs could influence European policymakers to move in a more self-reliant direction. While it's not the chaotic shift that might have been caused by a dissolution of NATO, it still adds up over time to a more multipolar world. For investors, such an outcome could create more regular volatility across markets. But we could also see markets reflect this higher geopolitical uncertainty with outperformance of sectors most impacted by the need to spend on all types of security – that includes traditional suppliers of military equipment as well companies providing cyber security. Thanks for listening. Subscribe to Thoughts on the Market on Apple Podcasts, or wherever you listen, and leave us a review. We'd love to hear from you.

With multiple, ongoing geopolitical conflicts, our analyst says investors should separate signals from noise in how these events can impact markets.Important note regarding economic sanctions. This research may reference jurisdiction(s) or person(s) which are the subject of sanctions administered or enforced by the U.S. Department of the Treasury's Office of Foreign Assets Control (“OFAC”), the United Kingdom, the European Union and/or by other countries and multi-national bodies. Any references in this report to jurisdictions, persons (individuals or entities), debt or equity instruments, or projects that may be covered by such sanctions are strictly incidental to general coverage of the relevant economic sector as germane to its overall financial outlook, and should not be read as recommending or advising as to any investment activities in relation to such jurisdictions, persons, instruments, or projects. Users of this report are solely responsible for ensuring that their investment activities are carried out in compliance with applicable sanctions. ----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the impact of geopolitical events on markets. It's Wednesday, February 7 at 5 pm in London.Geopolitical conflicts around the globe seem to be escalating in recent weeks. Increased US military involvement in the Middle East, fresh uncertainty about Ukraine's resources in its conflict with Russia, and lingering concerns about the US-China relationship are in focus. And since financial markets and economies around the world have become more interconnected, it's more important than ever for investors to separate signals from noise in how these events can impact markets. So here's a few key takeaways that, in our view, do just that.First, fighting in the red sea may influence the supply chain, but the results are probably smaller than you'd think. Yes, there's been a more than 200 per cent increase in the cost of freight containers moving through a channel that accounts for 12 per cent of global trade. But, the diversion of the freight traffic to longer routes around Africa really just represents a one-time lengthening of the delivery of goods to port. That's because there's an oversupply of containers that were built in response to bottlenecks created by increased demand for goods during the pandemic. So now that there's a steady flow of containers with goods in them, even if they are avoiding the Red Sea, the impact on availability of goods to consumers is manageable, with only a modest effect on inflation expected by our economists.Second, ramifications on oil prices from the Middle East conflict should continue to be modest. While it might seem nonsensical that fighting in the Middle East hasn't led to higher oil prices, that's more or less what's happened. But that's because disruptions to the flow of oil don't appear to be in the interest of any of the actors involved, as it would create political and economic risk on all sides. So, if you're concerned about movements in the price of oil as a catalyst for growth or inflation, then our team recommends looking at the traditional supply and demand drivers for oil, which appear balanced around current prices.Finally, as the US election campaigns gear up, so does rhetoric around the US-China economic relationship. And here we see some things worth paying attention to. Simply put, higher tariffs imposed by the US are a real risk in the event that party control of the White House changes. That's the stated position of Republicans' likely candidate – former President Trump – and we see no reason to doubt that, based on how the former President levied tariffs last time he was in office. As our chief Asia economist Chetan Ahya recently noted, such an outcome creates downside risk for the China economy, at a time when downside risk is accumulating for other structural reasons. It's one reason our Asia equity strategy team continues to prefer other markets in Asia, in particular Japan.Of course, these situations and their market implications can obviously evolve quickly. We'll be paying close attention, and keeping you in the loop.Thanks for listening! Subscribe to Thoughts on the Market on Apple Podcasts, or wherever you listen, and leave us a review. We'd love to hear from you.

2023 was a tough year for U.S. mergers and acquisitions. But our analysts think buyers and sellers are both positioned for a busy 2024.Wally Cheng is not a member of Morgan Stanley's Research department. Unless otherwise indicated, his views are his own and may differ from the views of the Morgan Stanley Research department and from the views of others within Morgan Stanley.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Wally Cheng: And I'm Wally Cheng, Head of West Coast Tech M&A for Investment Banking. Michael Zezas: And on this special episode of Thoughts on the Market, we'll focus on the outlook ahead for mergers and acquisitions in US tech. Michael Zezas: Wally, I really wanted to talk with you because 2023 was arguably the toughest year for U.S. mergers and acquisition markets since the global financial crisis. And we saw a three prong set of challenges in the form of rising interest rates, geopolitical conflicts and recession concerns. And that seems to have weighed on deal activity across the globe. Looking back, the first quarter of 2023 marked the lowest point of the M&A market, and since then we've seen deal activity tick higher. But from your perspective in tech banking, where are we right now and what should investors be watching for this year? Wally Cheng: The punch line answer that, Mike, is they should be looking for a bounce back in M&A in 2024 for all the reasons that you mentioned. Activity was very muted in 23. You highlighted rising interest rates. You highlighted geopolitical risks, wars, etc.. In that kind of environment deals just don't get done. There's not a meeting of the minds between buyer and seller. We're in a different environment now, I think what's happened over the last quarter or so is an appreciation or an acceptance of the new normal. The world has a lot of uncertainty around it, and that's no longer a new thing. It's a thing that buyers and sellers now know that they have to face for the foreseeable future. So my expectation for 2024 is much more activity, and we're seeing green shoots of that. And we saw a lot of that happening towards the end of last year. A number of large strategic deals that complemented the flow of private equity driven deals that we've seen for the last couple of years. The playing field now going into the full year of 2024 is really about all groups of buyers and sellers being active. What do I mean by that? I mean, on the buyer side, it's both corporate buyers and private equity buyers. Both active. First half of 2023 was only sponsors. Second half of 2023 was largely only strategics. Now they are both playing in the game. That's on the buyer's side. On the seller side, for the reasons that are articulated, sellers are no longer playing for a material change in the operating environment and a return or snap back, back to 2021 valuation levels. That was a blip on the screen, going to be a very long time to get back to there, if ever, and they're being much more sober and reasonable and realistic about valuations that they can get. So we're seeing much more of a meeting of the minds between buyer and seller. All buyer groups are active. Michael Zezas: So drilling down into your area of expertise a little bit more. It's been a slower tech IPO market recently. What's the impact of a slower IPO market on M&A? Wally Cheng: That is going to drive more M&A. And what I mean by that is when private companies can't get public, and return money to their private shareholders, they have to seek other ways of doing that. And that's M&A. Last year, and the year before were historically low in terms of IPO volume. Every year, on average over the last decade or so, there's been roughly 40 tech IPOs, last year and the year before less than ten. We're not expecting much more than that this year either. So with that kind of IPO volume, the huge number of private companies, by last count, about 1300 private companies of $1 billion in greater valuation were sitting in the private domain in technology. And of those 1300 companies, just a few of them are going to make it public in the next few years, which means they're going to have to seek other ways of monetizing for their shareholders. And that's going to be through M&A. Michael Zezas: So there's obviously a lot of discussion right now about when the Fed will begin cutting interest rates this year. But in any case, the consensus is that even when they are cutting, you're likely to see levels of interest rates also will be somewhat higher than what we saw in the decade between the financial crisis and the pandemic. So what's the potential impact on the next wave of M&A activity from having somewhat higher interest rates? Wally Cheng: It will be a factor that is going to hold back a more robust M&A market. But I think the real impact of it is going to be twofold. One is there are going to be many more stock deals. So deals where stock is used as an acquisition currency to buy the target. And then two is I think there's going to be a lot more activity from buyers who have a lot of cash firepower sitting on their balance already. They're going to press their advantage in an environment like this, where for many buyers who don't have that same luxury of cash on their balance sheet and require outside financing at the higher rates that you mentioned to go finance deals, which will make those deals a little bit more difficult to justify economically. So if you've got very inexpensive cash sitting on your balance sheet, now's the time to go use it. Michael Zezas: Drilling down a bit here, what sub sectors within technology do you think will see the most M&A activity? Wally Cheng: Number one software. And number two Semis with an asterisks on Semis, which I'll get to in a second. In both of those industries consolidation is imperative. In software. Customers are looking for best of platform solutions not best of breed anymore. So in a landscape where there are a thousand plus software companies valued at greater than $1 billion that are either public or private today there's going to be a lot of M&A happening, to get to a product offering that looks more like a best of platform solution for their customers. Similarly, in Semis, the dynamic is the same, a little bit more driven by scale, and that is really what's driving M&A in Semis. There's about 100 semiconductor companies that are public today with more than $1 billion in value. Our expectation is that the need for scale is going to drive that number down to about a third of that through M&A over the next 5 to 10 years. The asterisks that I mentioned on the semiconductor activity is that in order to get the semiconductor deal done today, given the global nature of their revenue, is that they require regulatory approval from governments all over the globe. And in today's environment, where East and West are in a tug of war for tech supremacy, those approvals are really difficult to get. Are they impossible? No. Does it take longer to get them? Yes. So buyers and sellers in semis are really, really taking a hard look at whether or not they can get regulatory approval before announcing their deals, because the last thing they want to do is announce a deal, wait for two years to get it approved, it not be approved, and they've got damaged companies coming out of the end of that. Michael Zezas: Got it. So geopolitical concerns, still a limiting factor for cross-border M&A, but overall we're seeing tailwinds for M&A activity picking up. Wally Cheng: You got it. Michael Zezas: Well Wally thanks for taking the time to talk. Wally Cheng: Super speaking to you Mike. Thanks. Michael Zezas: As a reminder if you enjoy Thoughts on the Market, please take a moment to rate review us on the Apple Podcasts app. It helps more people find the show.

While it's too early to tell who will win the U.S. presidential election ­­­– or how markets will respond to it – there are a few factors that investors should consider.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the impact of the US election on markets. It's Wednesday, January 24th at 10 a.m. in New York. We're two states into the Republican primary election season. Former President Trump has won both contests, underscoring what polls have been suggesting for months now. That he's the heavy favorite to be the party's nominee for the presidency. But other than that, have we learned anything that might matter to markets? Not particularly in our view. This election will clearly be consequential, the markets, but for the moment we're more in watch and learn mode. Here's two reasons to consider. First, knowing who the Republican candidate will be doesn't tell us much about who will become president. While we've heard from some clients that they rate President Biden's chances of reelection as low, and therefore, knowing who will be the Republican nominee is the same as knowing who will be president, we don't agree with this logic. Sitting presidents have had low approval ratings this far ahead of an election and still won before. Also, polls may show that economic factors like inflation are a political weakness for Biden today, but those circumstances could change given how quickly inflation is easing. Now, this doesn't mean we expect Biden will win, it's just that we think it's far from clear who the favorite is in this election. Our second point is that, even if we know who wins, we don't necessarily know what reliable market impact this would have. That's because there are many crosscurrents to the policies each party is pursuing. Democrats may be interested in more social spending, which could boost consumption, but they may also be interested in taxes to fund it, which could cut against growth. Republicans may be interested in lower taxes, but the presumptive nominee is also interested in increased tariffs, which could mitigate tax impacts. To top it off, neither party may be able to do much with the presidency unless they also control Congress, something that polls show will be difficult to achieve. So, this all begs the question. What will make this election matter to markets? The answer, in our view, is time and market context. As we get closer to the election, what's in the price of equity in bond markets will largely shape the stakes for investors. For example, if markets are priced for weak economic outcomes, investors may embrace a unified government outcome regardless of party, as it opens the door to fiscal stimulus measures. Of course, this is only one scenario that may matter, but you can see the point on how context is important. So as the stakes become clearer, we'll define them here and let you know more about it. Thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague or leave us a review on Apple Podcasts. It helps more people find the show.

Elections, geopolitical risks and rate cuts are driving markets in the short term. But there are three trends that could provide long-term investment opportunities.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about three key investment themes for 2024. It's Wednesday, January 17th at 10 a.m. in New York. Markets will have plenty of potential near-term catalysts to contend with in 2024. There's elections, geopolitical risks as tensions rise with regional conflicts in Europe and the Middle East, and key debates about the timing and pace of central bank rate cuts. We'll be working hard to understand those debates, which will influence how markets perform this year. But what if you're thinking a bit longer term? If that's you, we've got you covered. As it's become our annual tradition, we're rolling out three secular themes that Morgan Stanley research will be focused on developing collaborative, in-depth research for, in an effort to identify ways for investors to create potential alpha in their portfolio for many years to come. The first theme is our newest one, longevity. It's the idea that recent breakthroughs in health care could accelerate the trend toward longer and higher quality human lives. To that end, my research colleagues have been focused on the potential impacts of innovations that include GLP-1 drugs and smart chemo. Further, there's reason to believe similar breakthroughs are on the horizon given the promise of AI assisted pharmaceutical development. And when people lead longer lives, you'd expect their economic behavior to change. So there's potential investment implications not just for the companies developing health care solutions, but also for consumer companies, as our team expects that, for example, people may consume 20 to 30% less calories on a daily basis. And even asset managers are impacted, as people start to manage their investments differently, in line with financing a longer life span. In short, there's great value in understanding the ripple effects into the broader investment world. The second theme is a carryover from last year, the ongoing attempts to decarbonize the world and transition to clean energy. Recent policies like the Inflation Reduction Act in the US include substantial subsidies for clean energy development. And so we think it's clear that governments and companies will continue to push in this direction. The result may be a tripling of renewable energy capacity by 2030. And while this is happening, climate change is still asserting itself and investment should pick up in physical capital to protect against the impact. So all these efforts put in motion substantial amounts of capital, meaning investors need to be aware of the sectors which will be crimped by new costs and others that will see the benefits of that spend, such as clean energy. Our third theme is also a carryover, the development of AI. In 2023, companies we deemed AI enablers, or ones who were actively developing and seeking to deploy that technology, gained about $6 trillion in stock market value. In 2024, we think we'll be able to start seeing how much of that is hype and how much of that is reality, with enduring impacts that can create long term value for investors. We expect clear use cases and impacts to productivity and company's bottom lines to come more into focus and plan active research to that end in the financials, health care, semiconductor, internet and software sectors, just to name a few. So stay tuned. We think these debates could define asset performance for many years to come. And so we're dedicated to learning as much as we can on them this year and passing on the lessons and market insights to you. Thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague, or leave us a review on Apple Podcasts. It helps more people find the show.

Companies that offer generative AI solutions saw their valuations rise in 2023. This year, investors should look at the companies adopting these solutions.----- Transcript -----Welcome to Thoughts on the Market. I'm Ed Stanley, Morgan Stanley's Head of Thematic Research in Europe. And along with my colleagues, bringing you a variety of perspectives, today I'll discuss our views on the broad impacts of AI across global markets. It's Tuesday, the 9th of January at 2 p.m. in London. AI has established itself as a critical theme of the last 12 months, but we are clearly in the early innings of its diffusion. More specifically, 2023 was very successful for AI players that we call the enablers, those first line of hardware and software companies that play into the generative AI debate. But after the first wave of excitement, how does that trend percolate through the rest of the market, and how much of the hype will translate to sustainable earnings uplift? What is the next move for this entire debate, which so captivated markets in 2023? Our team mapped out the next stage of the debate across all regions and industries, and came to three key conclusions. The first, looking back at 2023, the enablers did extraordinarily well, and that shouldn't come as a surprise to any of our regular listeners. Some of those companies saw triple digit returns last year, and we estimate that more than $6 trillion of market cap was added to those names globally. But that brings us to our second key conclusion. Namely, looking forward, we think that investors should now turn their attention to the adopters. Meaning companies that are leveraging the enablers software and hardware to better use their own data and monetize that for the AI world. Looking back last year, where the enablers returned more comfortably double digit and triple digit returns, the adopters only gained on average around 6%. Of course, we're only in the early innings of the AI revolution, and the market is still treating these adopters as a "show me" story. We think that 2024 is going to be transformative for this adopter group, and we expect to see a wave of product launches using large language models and generative AI, particularly in the second half of 2024. Our third key conclusion is around the rate of change. And what do we mean by this? Well, in 2023, the enabler stocks, where AI was moderately important to the investment debate, increased their total market cap by around 28%. But if AI increases in importance to the point where analysts deem it to be core to the thesis for that particular stock, we expect it can add another 40% to market cap of this group based on last year's performance. A final point worth noting is that investors should pay close attention to the give and take between enabler and adopter groups. As I mentioned, the adopters were relatively more muted in their performance last year than the enablers. However, we believe in 2024 we will see the virtuous cycle between these two groups come into greater focus for investors. Enablers, consensus upgrades and valuations will depend increasingly on the enterprise IT budgets being deployed by the adopters in 2024-25. The adopters, in turn, are in a race to build both revenue generating and productivity enhancing tools, which completes the virtuous circle by feeding the enablers revenue line. Thanks for listening. If you enjoy the show, please leave us a review on Apple Podcasts and share Thoughts on the Market with a friend or a colleague today.

Original Release on December 6th, 2023: Although much will change before the elections, investors should watch for potential impacts on issues such as AI regulation, energy permitting, trade and tax policy.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Ariana Salvatore: And I'm Ariana Salvatore, from the U.S. Public Policy Research Team. Michael Zezas: On this special episode of Thoughts on the Market, we'll discuss our early views around the 2024 U.S. presidential election. It's Wednesday, December 6th at 10 a.m. in New York. Michael Zezas: With U.S. elections less than a year away now, it's likely much will change in terms of the drivers of the outcome and its market impact. Still, we believe early preparation will help investors navigate the campaign. And so starting now, we'll bring your updated views and forecasts until the U.S. elects its next president in November of 2024. Arianna, we've noted that this upcoming election will affect particular sectors rather than the broader macro market. What's driving this view? Ariana Salvatore: There are really two reasons that we've been pointing to. First, lawmakers have achieved a lot of their policy priorities that impact the deficit over the past few election cycles. If you think about the 2017 Tax Cuts and Jobs Act or the infrastructure bill back in 2021, for example. Now they're turning to policy that holds more sectoral impacts than macro. The second reason is that inflation is still a very high priority issue for voters. As we've noted, an elevated level of concern around inflation really disincentivizes politicians from pushing for legislation that could expand the deficit because it's seen as contrary to that mandate of fiscal austerity that comes in a high inflation environment. There is one exception to this. As we've noted before, lawmakers will have to deal with the expiring Tax Cuts and Jobs Act. We think the different configurations post 2024 each produce a unique outcome, but we expect in any scenario, that will only add modestly to the deficit. Michael Zezas: And digging into specific sectors. What policies are you watching and which sectors should investors keep an eye out for in the event these policies pass? Ariana Salvatore: Following the election, we think Congress will turn to legislative items like AI regulation, energy permitting, trade and tax policy. Obviously, each unique election outcome will facilitate its own level and type of policy transformation. But we think you could possibly see the biggest divergence from the status quo in a Republican sweep. In particular, in that case, we'd expect lawmakers to launch an effort to roll back, at least partially, the Inflation Reduction Act or the IRA, though we ultimately don't think a full scale repeal will be likely. We also expect to see something on AI regulation based on what's currently in party consensus, easing energy permitting requirements and probably extending the bulk of the expiring Tax Cuts and Jobs Act. That means sectors to watch out for would be clean tech, AI exposed stocks and sectors most sensitive to tax changes like tech and health care. Mike, as we mentioned, with this focus on legislation that impacts certain sectors, we don't expect this to be a macro election. So is there anything that would shift the balance toward greater macro concerns? Michael Zezas: Well, if it looks like a recession is getting more likely as the election gets close, it's going to be natural for investors to start thinking about whether or not the election outcome might catalyze a fiscal response to economic weakness. And in that situation, you'd expect that outcomes where one party doesn't control both Congress and the White House would lead to smaller and somewhat delayed responses. Whereas an outcome where one party controls both the White House and Congress, you would probably get a bigger fiscal response that comes faster. Those are two outcomes that would mean very different things to the interest rates market, for example, which would have to reflect differences in new bond supply to finance any fiscal response, and of course, the resulting difference in the growth trajectory. Ariana Salvatore: All right so, keeping with the macro theme for a moment. How do our expectations for geopolitics and foreign policy play into our assessment of the election outcomes? Michael Zezas: Yeah, this is a difficult one to answer, mostly because it's unclear how different election outcomes would net impact different geopolitical situations. So, for example, investors often ask us about what outcomes would matter for a place like Mexico, where they're concerned that some election outcomes might create economic challenges for Mexico around the US-Mexico border. However, those outcomes could also improve the prospects for near shoring, which improves foreign direct investment into Mexico. It's really unclear whether those cross-currents would be a net positive or a net negative. So we don't really think there's much specific to guide investors on, at least at the moment. Finally, Arianna, to sum up, how is the team tracking the presidential race and which indicators are particularly key, the focus on? Ariana Salvatore: Well, recent history suggests that it will be a close race. For context, the 2022 midterms marked the fourth time in four years that less than 1% of votes effectively determined which side would control the House, the Senate or the White House. That means that elections are nearly impossible to predict. But we think there are certain indicators that can tell us which outcomes are becoming more or less likely with time. For example, we think inflation could influence voters. As a top voter issue and a topic that the GOP is better perceived as equipped to handle, persistent concerns around inflation could signal potential upside for Republicans. Inflation also tracks very closely with the president's approval rating. So on the other hand, if you see decelerating inflation in conjunction with overall improving economic data, that might indicate some tailwinds for Democrats across the board. We're going to be tracking other indicators as well, like the generic ballot, President Biden's approval rating and prediction markets, which could signal that different outcomes are becoming more or less likely with time. Michael Zezas: Ariana, thanks for taking the time to talk. Ariana Salvatore: Great speaking with you, Mike. Michael Zezas: As a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple Podcasts app. It helps more people find the show.

While the U.S. debt ceiling challenge and the conflict in the Middle East left markets largely undisturbed this year, 2024 could tell a different story.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be looking ahead to geopolitical catalysts for markets in 2024. It's Wednesday, December 20th at 11 a.m. in New York. 2023 was a year that, in our view, stood out as one where geopolitics surprisingly impacted markets far less than in recent years. But investors shouldn't get complacent because 2024 is full of potential geopolitical catalysts for markets. Let's start by looking back. The year that was had plenty of potential catalysts that could have arisen from the political economy. The U.S. flirted again with default by taking a painfully long time to raise the debt ceiling. Its credit rating suffered a downgrade along the way, but the volatility was barely noticeable in the equity and bond markets. Later in the year, a major military conflict broke out in the Middle East, creating a threat of major escalation and confrontation among nations both inside and outside the region, as well as disruptions to the global supply of oil. Still, markets shrugged with the price of oil mostly keeping steady and major global equity indices continuing on their prior trend. How were markets immune to these events? There's explanations specific to each event. For the debt ceiling, despite the brinkmanship, the probability that Congress wouldn't actually lift the debt ceiling was always quite small. For the Middle East, disruptions of the supply of global oil was not in anyone's interest. But there was also a bigger explanation for investors who look past this. The more important debate all year was whether central banks could turn the tide on inflation, and if so, could they avoid recession along the way. 2024 should be a different story. The debate about inflation in developed markets looks increasingly settled, but the growth debate lingers. While our economists see the U.S. avoiding a recession or having a soft landing, recession remains a key risk. Meaning even small impacts from geopolitical events could meaningfully shift investors perceptions about whether positive or negative economic growth is the base case next year, with asset valuations shifting at the same time. And there will be plenty of events to watch. U.S. elections are clearly one area of focus with implications for Fed policy, global trade and ongoing assistance to Ukraine, whose conflict with Russia continues to carry risks to the European outlook. But it's not just the U.S. There are as many as 40 elections in key countries next year, including in India and Mexico, two secular growth stories our strategist favor. So stay tuned to geopolitics in 2024, we certainly will and we'll continue to share our insight into what it all means for markets. Thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague or leave us a review on Apple Podcasts. It helps more people find the show.

Investors are concerned about the potential impact of the upcoming U.S. presidential election in a number of sectors. Here's what to watch.----- Transcript -----Welcome to the Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research from Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about the impact of the U.S. elections on markets. It's Wednesday, December 13th at 10 a.m. in New York. Following our publication last week of our early look for investors at the U.S. election, we've had plenty of discussion with clients trying to sort out what the event might mean for markets. Here's the three most frequently asked questions we've received and of course, our answers. First, could the election be a catalyst to undo planned investment into the clean energy industry? This question often gets asked as, under what conditions could the Inflation Reduction Act be repealed? That Act allocated substantial sums to investment in clean energy alternatives, a boon for the industry. In our view, we don't see that act being repealed, even if Republicans who oppose the act take control of both Congress and the White House. We think there's too many negative local economic consequences to undoing that investment, to get a sufficient number of Republicans to vote for the repeal. However, clean energy investors should note that a Republican administration might be able to slow the spend of that money using the regulatory process. Second, should healthcare investors be concerned that there's an election outcome that could substantially change the U.S. healthcare system? This was a concern in prior elections where Republicans promised to repeal the Affordable Care Act, an outcome current President Trump has recommitted to in his current campaign. Republicans couldn't make good on that promise, despite unified government control in 2017 and 2018. And here we think history would repeat itself with even a Republican majority having difficulty finding sufficient votes if it means restricting health care delivery to some of their voters. That said, investors in sectors that would be negatively impacted by a repeal of the Affordable Care Act could see market effects if Republicans start surging in the polls, as markets would then have to account for the possibility, albeit modest, of repeal. Finally, when might political campaigns begin impacting markets? We don't have a clear answer here. In 2016 and 2020, health care stocks started reflecting campaign statements early in the year. Whereas macro market effects, such as the sensitivity of the Mexican peso to then candidate Trump's comments around renegotiating trade agreements, didn't kick in until much closer to November. The bottom line is that we don't really know, which is why we're here to help you prepare now. Thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague, or leave us a review on Apple Podcasts. It helps more people find the show.

Although much will change before the elections, investors should watch for potential impacts on issues such as AI regulation, energy permitting, trade and tax policy.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Ariana Salvatore: And I'm Ariana Salvatore, from the U.S. Public Policy Research Team. Michael Zezas: On this special episode of Thoughts on the Market, we'll discuss our early views around the 2024 U.S. presidential election. It's Wednesday, December 6th at 10 a.m. in New York. Michael Zezas: With U.S. elections less than a year away now, it's likely much will change in terms of the drivers of the outcome and its market impact. Still, we believe early preparation will help investors navigate the campaign. And so starting now, we'll bring your updated views and forecasts until the U.S. elects its next president in November of 2024. Arianna, we've noted that this upcoming election will affect particular sectors rather than the broader macro market. What's driving this view? Ariana Salvatore: There are really two reasons that we've been pointing to. First, lawmakers have achieved a lot of their policy priorities that impact the deficit over the past few election cycles. If you think about the 2017 Tax Cuts and Jobs Act or the infrastructure bill back in 2021, for example. Now they're turning to policy that holds more sectoral impacts than macro. The second reason is that inflation is still a very high priority issue for voters. As we've noted, an elevated level of concern around inflation really disincentivizes politicians from pushing for legislation that could expand the deficit because it's seen as contrary to that mandate of fiscal austerity that comes in a high inflation environment. There is one exception to this. As we've noted before, lawmakers will have to deal with the expiring Tax Cuts and Jobs Act. We think the different configurations post 2024 each produce a unique outcome, but we expect in any scenario, that will only add modestly to the deficit. Michael Zezas: And digging into specific sectors. What policies are you watching and which sectors should investors keep an eye out for in the event these policies pass? Ariana Salvatore: Following the election, we think Congress will turn to legislative items like AI regulation, energy permitting, trade and tax policy. Obviously, each unique election outcome will facilitate its own level and type of policy transformation. But we think you could possibly see the biggest divergence from the status quo in a Republican sweep. In particular, in that case, we'd expect lawmakers to launch an effort to roll back, at least partially, the Inflation Reduction Act or the IRA, though we ultimately don't think a full scale repeal will be likely. We also expect to see something on AI regulation based on what's currently in party consensus, easing energy permitting requirements and probably extending the bulk of the expiring Tax Cuts and Jobs Act. That means sectors to watch out for would be clean tech, AI exposed stocks and sectors most sensitive to tax changes like tech and health care. Mike, as we mentioned, with this focus on legislation that impacts certain sectors, we don't expect this to be a macro election. So is there anything that would shift the balance toward greater macro concerns? Michael Zezas: Well, if it looks like a recession is getting more likely as the election gets close, it's going to be natural for investors to start thinking about whether or not the election outcome might catalyze a fiscal response to economic weakness. And in that situation, you'd expect that outcomes where one party doesn't control both Congress and the White House would lead to smaller and somewhat delayed responses. Whereas an outcome where one party controls both the White House and Congress, you would probably get a bigger fiscal response that comes faster. Those are two outcomes that would mean very different things to the interest rates market, for example, which would have to reflect differences in new bond supply to finance any fiscal response, and of course, the resulting difference in the growth trajectory. Ariana Salvatore: All right so, keeping with the macro theme for a moment. How do our expectations for geopolitics and foreign policy play into our assessment of the election outcomes? Michael Zezas: Yeah, this is a difficult one to answer, mostly because it's unclear how different election outcomes would net impact different geopolitical situations. So, for example, investors often ask us about what outcomes would matter for a place like Mexico, where they're concerned that some election outcomes might create economic challenges for Mexico around the US-Mexico border. However, those outcomes could also improve the prospects for near shoring, which improves foreign direct investment into Mexico. It's really unclear whether those cross-currents would be a net positive or a net negative. So we don't really think there's much specific to guide investors on, at least at the moment. Finally, Arianna, to sum up, how is the team tracking the presidential race and which indicators are particularly key, the focus on? Ariana Salvatore: Well, recent history suggests that it will be a close race. For context, the 2022 midterms marked the fourth time in four years that less than 1% of votes effectively determined which side would control the House, the Senate or the White House. That means that elections are nearly impossible to predict. But we think there are certain indicators that can tell us which outcomes are becoming more or less likely with time. For example, we think inflation could influence voters. As a top voter issue and a topic that the GOP is better perceived as equipped to handle, persistent concerns around inflation could signal potential upside for Republicans. Inflation also tracks very closely with the president's approval rating. So on the other hand, if you see decelerating inflation in conjunction with overall improving economic data, that might indicate some tailwinds for Democrats across the board. We're going to be tracking other indicators as well, like the generic ballot, President Biden's approval rating and prediction markets, which could signal that different outcomes are becoming more or less likely with time. Michael Zezas: Ariana, thanks for taking the time to talk. Ariana Salvatore: Great speaking with you, Mike. Michael Zezas: As a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple Podcasts app. It helps more people find the show.

The next phase in artificial intelligence could be “edge AI,” which lowers costs and improves security by embedding AI capabilities directly in smartphones and other devices.----- Transcript -----Welcome to Thoughts on the Market. I'm Ed Stanley, Morgan Stanley's Head of Thematic Research in Europe. And along with my colleagues, bringing you a variety of perspectives, today I'll discuss Edge A.I. It's Monday, the 20th of November at 2 p.m. in London. The last year has seen a surge in adoption of artificial intelligence, particularly for foundational model builders and consumer-facing chatbots. But we think the next big wave of A.I will be embedded in consumer devices, this is smartphones, notebooks, wearables, drones and autos, amongst others. Enter Edge A.I. This means running A.I algorithms locally rather than in centralized cloud computing facilities in order to power the killer apps of the A.I age. Generative A.I., cloud computing, GPUs and hyperscalers, that is, the large cloud service providers that run computing and storage for enterprises. They all remain central to the secular machine learning trend. However, as A.I continues to permeate through all aspects of consumer life and enterprise productivity, it will push workloads to hardware devices at the edge of networks. The US data firm Gartner estimates that by 2025, half of enterprise data will be created at the Edge, across billions of battery powered devices. The key benefits of A.I computation performed at the Edge are lower cost, lower latency personalization and importantly, higher security or privacy relative to centralized cloud computing. And the prize in moving these workloads to the Edge is large, we're talking some 30 billion devices by the end of the decade, but the hurdles are also significant. We think 2024 will be a catalyst year for this theme. And the companies that could benefit range from household name hardware vendors to key components suppliers around the world. But just as there are benefits to Edge A.I, there are constraints as well. Not all Edge devices are created equal, for example. The clearest limitations across hardware media are battery life and power consumption, processing capabilities and memory, as well as form factor, i.e. how they look. For example, mass market smartphones and notebooks today don't have the battery life or processing capability to run inferencing of the largest large language models. This will have to change over time, which will require investment predominantly in advanced proprietary silicon or custom ASICs as they're known, of which we've seen a number of announcements from big tech companies in recent weeks. The hardware arms race is really heating up in our view. It's important to note, though, that generative A.I. and Edge A.I are not mutually exclusive. In fact, Generative A.I. has reinforced the already growing need for edge A.I. Our consumer and investor trend analysis suggests that the theme is already moving into its upswing phase. Moreover, a slate of new product releases as soon as Q1 2024, such as Edge A.I enabled smartphones with embedded custom silicon, should drive further investor interest in this theme over the coming 12 months. And we think smartphones stand the best chance of breaking the bottleneck soonest and they also have the largest total addressable market potential in the short and medium term. This is an uncrowded theme which we think is in pole position for 2024. Thanks for listening. If you enjoy the show, please leave a review on Apple Podcasts and shared Thoughts on the Market with a friend or a colleague today.

Despite some falloff in consumer interest, anti-obesity drugs are still likely to have profound implications at both the macro and sectoral level.----- Transcript -----Welcome to Thoughts on the Market. I'm Ed Stanley, Morgan Stanley's Head of Thematic Research in Europe. Along with my colleagues, bringing you a variety of perspectives, today I'll give you an update on the all important obesity theme and how it's impacting a wide range of industries. It's Thursday, November the 9th at 2 p.m. in London. GLP-1s, a type of anti-obesity medicine, have been on the market since 2010, but it's taken until 2023 for this theme to really come to life. We believe that GLP-1s will clearly have profound implications over the long term, both on a macro and micro level. Obesity has far reaching implications for the global economy as it leads to lost productivity and significant health care costs. We estimate the macro impact of obesity at 3.6% of US GDP, with potentially $1.24 trillion in lost productivity indirect costs. Anti-Obesity drugs have the potential to address at least some of this economic burden and at a reasonable cost. The micro implications on businesses year-to-date have seen about a $600 billion swing in market cap. That includes, to the upside, $340 billion for the GLP-1 makers and over $260 billion lost in market value for the stocks that are potentially disrupted. For context, that compares to a total US drug market of $430 billion annually. 2023 saw an impressive surge in investor interest in anti-obesity drugs. Yet and perhaps surprising to some based on hashtag and web traffic data we track, consumer interest appears to have waned in recent weeks. We think this notable dip from the peak in activity is driven in part by supply constraints, paused geographic expansion and curtailed promotional activity. Importantly though, this fade in initial consumer excitement is occurring at the same time that company transcript mentions of obesity or GLP-1 by non-pharma companies are reaching new highs. This disconnect between sain street moderation and excitement versus Wall Street's rise in excitement, is very typical of short term hype cycle tops in equity markets, particularly given the current environment of higher interest rates. But even as the initial buzz around obesity drugs is fading back to more moderate levels in the near term, we do believe there will be wide ranging implications over the long term that are hard to deny. And our global analysts have been all over this on a sector by sector basis. First off, we believe that US alcohol beverages per capita will correct due to abnormally high consumption in recent years and longer term structural challenges such as demographic, health and wellness. For beer growing adoption of obesity medication presents an incremental risk factor to consumption, although many of these companies are already working on healthier options. Across packaged foods, patients on anti-obesity medications have been cutting back the most on foods high in sugar and fat, such as confections, baked goods, salty snacks, sugary drinks and alcohol. Companies with a weight management or better for you portfolio appear to be better positioned for here. Within US food retail, we think dollar stores which target lower end consumers with outsized exposure to high calorie foods, will be the most adversely impacted in the context of increased adoption of these drugs. Separately, insulin pump makers should be only minimally impacted, we think, by GLPs by 2027, which suggests that the share price reaction to the downside for these stocks year-to-date may be materially overdone. Obesity has a direct impact on osteoarthritis, with about twice the prevalence of arthritis in obese versus non obese patients. A much higher need for arthroplasty with higher BMIs and obese patients having higher surgical complications. GLP-1 usage could have some complex effects on these ortho stocks. We also see longer term risk for most of the US and European fast food industry. The same goes for carbonated sugary drinks and for chocolate lovers out there, the rising GLP-1 adoption could pressure chocolate consumption longer term. But the magnitude of these impacts remains uncertain, as indulgence will still remain a core consumer need even in this new GLP-1 paradigm. All in all, we remain bullish on the anti-obesity drug market, particularly given the staggering 750 million people globally living with obesity, and this continues to be a dynamic space for investors to watch closely. Thanks for listening. If you enjoyed this show, please leave a review on Apple Podcasts and share Thoughts on the Market with a friend or a colleague today.

The recent treasury rally signals that perhaps the U.S. fiscal trajectory isn't as challenging as bond investors had feared.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the impact of U.S. fiscal policy on markets. It's Wednesday, November 8th at 10 p.m. in New York. As Congress gets back to work on funding the government and avoiding a government shutdown, investors' attention has turned back to public finances. In particular, as bond markets sold off much of the year, a common theory posited by clients to our team was that U.S. fiscal policy was to blame. Expanding deficits meant higher supply and could also mean higher inflation, growth and ultimately a higher peak Fed funds rate. But upon closer examination, maybe the U.S. fiscal trajectory isn't as challenging as feared, and the bond market may be finally noticing. Treasuries have rallied in the past week. Which makes sense to us as our assessment is that U.S. fiscal expansion at all levels has either peaked or is near its peak. Consider that the federal deficit this year rose largely based on lower revenues driven by factors that are unlikely to repeat. For example, Fed remittances zeroed out, and there's about $85 billion of deferred collection of tax revenue due to natural disasters. Together with other factors, we think this year's nearly 1% growth in deficits as a percentage of GDP will be followed next year by a decline of about 0.2%. Further downside is possible if a spending sequester kicks in, in April. Also, consider that major deficit expansion isn't likely to be on Congress's agenda. Between now and the 2024 election, there's little reason to expect deficit expanding bills beyond the current baseline. Government control is divided, and history shows that makeup rarely does fiscal expansion unless it's responding to an economic crisis. After Election Day, Republicans and Democrats do have deficit additive policies they say they want to pursue, but the numbers are relatively modest. Republicans' plan to extend parts of prior tax cuts would add about 0.3% to deficits as a percentage of GDP in the first year, and we estimate the consensus tax and spending plans of Democrats would add about 0.1%, both manageable numbers. Also worth noting is that state and local governments seem near their peak fiscal expansion. Their recent expansion appears tied to spending of prior COVID aid, which is quickly depleting, as well as hiring, which is nearly back to pre-COVID levels. So bottom line, if you're concerned about Treasury yields resuming their upward trend, look elsewhere for a catalyst. Consumption would be the most likely culprit but at the moment, our economists are still seeing downside there in the near term. This gives us confidence that the worst of U.S. government bond returns is probably behind us for this cycle. Thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague or leave us a review on Apple Podcasts. It helps more people find the show.