Welcome to Thoughts on the Market.

I'm Michael Zezis, Head of Public Policy Research and Municipal Strategy for Morgan Stanley.

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

intersection between U.S. Public Policy and Financial Markets.

It's Wednesday, March 3rd at 11 a.m. in New York.

Markets are paying attention as Congress appears close to completing its work on a COVID-relief

package.

But we think the drama around that event is largely over, and markets will quickly ship

focus to the next legislative battle.

The Biden administration's proposed Build Back Better Plan.

Expect headlines to start swirling about the proposal, which could include trillions

of dollars of spending to address infrastructure and environmental issues, as well as substantial

tax increases.

Here's what we think investors need to know about its potential impact.

First, expect the bill to take most of the year to be enacted, and for its size and makeup

to appear to change throughout the negotiation.

But when enacted, expect it to be supportive of the ongoing economic recovery and reflation

trades in the market.

Early templates for the bill suggest spending of at least one and a half trillion dollars.

In our view, that spending will only be partially funded by tax increases, hence adding another

dose of fiscal support to the economy.

This approach is incentivized by public opinion polls suggesting voters won't punish

...