Happy New Year and welcome back to Thoughts on the Market.

I'm Andrew Sheets and this year we are excited to bring you even more perspectives from

the research team at Morgan Stanley, Monday through Friday every week. We hope you enjoy the new Friday, every week.

We hope you enjoy the new voices, new music,

and same great market takeaways you've come to expect.

It's Thursday, January 7th at 2 p.m. in London.

Tuesday's special election in Georgia safely qualifies as the first

surprise of 2021. My colleague Michael Zizis discussed on his episode about what

this might and might not mean for policy and I wanted to expand on the market implications

and why we think this surprise supports more reflation and rotation in portfolios.

The first implication of the Georgia results relates to a risk to our base case.

We're constructive for 2021 and expect solid returns.

But a key risk to this story would be that we're underestimating the risks of a new COVID

variant or slow vaccination program and that policy makers don't meet these challenges with further support.

The AND in that previous sentence is really important.

Additional policy help makes it much easier for the market to look through these challenges as we saw last year.

The Georgia results are important for this scenario because they make it much more likely that

Congress would take action and quickly if the economy evolved worse than our current base case.

The second implication is at the other end of the spectrum, to the upside.

We think there's a good chance that the new Congress will push for up to one trillion in additional

economic support, including $2,000 direct payments

even if the economy doesn't go through a new additional deterioration.

...