Welcome to Thoughts on the market.

I'm Andrew Sheets, Chief Cross Asset Strategy for Morgan Stanley.

Along with my colleagues bring you a variety of perspectives, I'll be talking about trends

across the global investment landscape and how we put those ideas

together. It's Friday, October 30th at 2 p.m. in London.

Amidst a surge in COVID-19 cases, the eyes of the world are on the US election which takes place this

coming Tuesday as my colleague Michael Zesus and I discussed last week markets are

going to care a lot about who controls Congress not just who wins the

White House.

This in turn has a lot to do with what is and isn't possible to legislate without control of both

the House and the Senate.

A sweep by either party is most likely to bring the type of transformative change in

economic policy that would drive the largest rotation in financial market

leadership. I'd stress that one does not have to go back very far to find

examples of exactly this type of outcome.

In 2016, Republicans swept the presidency, the House, and the Senate. And then in 2017, markets embraced a very reflationary mindset, with stocks rising, yields rising, and cyclicals outperforming.

In 2008, Democrats swept the presidency, the House, and the Senate.

And what happened in 2009? Stocks rose, and cyclicals outperformed.

Part of this pattern is explained by policy action, as both administrations use their power

to ease fiscal policy, albeit in different ways.

But there's another essential part of these stories, one that's also very relevant to today.

In both November 2008 and November 2016, expectations for growth were very downbeat.

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