Welcome to Thoughts on the Market.

I'm Michael Zezas, 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, February 24th at 11 a.m. in New York.

Continuing on last week's discussion of geopolitical risks to the market, let's talk about the

relationship between the U.S. and Mexico.

The previous administration's attempts to forge a new direction for that relationship often

led to tensions that caused market concern.

This included a tense, deadline-driven re-negotiation of NAFTA into what is now called the U.S.-Mexico

Canada Trade Agreement, or USMCA.

It also included the U.S. threatening escalating tariffs on Mexico if it didn't undertake initiatives

on border security.

While some investors have expressed confidence these flashpoints may be in the past, noting

that the Biden administration stated border policies differ greatly, we think investors

shouldn't yet rest easy on this risk.

Notably, there's signs that Mexico's pursuing legal reforms that counter the U.S.MCA.

In focus, as Mexico's president's plan to overturn a reform that had opened Mexico's

energy markets to foreign investors.

As with the U.S. and China, the good news for markets, which tend to dislike uncertainty

and surprises, is that the Biden administration is flagging a more deliberate approach than

its predecessors.

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