Welcome to Thoughts on the market. I'm Michael Zezes, 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.

As China and other countries continue the response to the spread of the coronavirus, our

economists are closely monitoring what impact it will have to global growth.

The most acute impact so far has been the drop in industrial production, as sick and quarantine

workers have had to stay home.

Our economists think the impact of global growth could range from 0.15 to 0.5 percent.

These events draw our attention back to a theme we first introduced last year,

slobilization. It's the idea that a variety of political and economic incentives are emerging that will slow and perhaps eventually reverse the cost benefits that globalization have been delivering to companies for a generation.

Here the coronavirus is a reminder to companies of the rising need for them to diversify their supply chains and markets.

Of course, health risks to workers can arise anywhere, but with China's rise as a contributor to global supply chains,

disruptions there can have a greater ripple effect on business around the globe.

Take the tech supply chain, for example, where 81% of assembly is done in China and 64% of components are produced there.

Companies seem to already understand this as a variety of surveys in recent years,

including our own, have shown that companies are taking steps to reduce their reliance on China.

Of course, the investment to do that comes of the cost,

at least in the short term.

So expect cost pressures to be a theme in key equity sectors like retail,

apparel in particular and semiconductors.

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