Welcome to Thoughts on the Market. I'm Michael Zesas, 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, July 15th at 11 a.m. in New York.

Next week, Congress returns to Washington, D.C. to discuss a major COVID-19 economic response bill.

They're scheduled to be in session for two weeks before recessing for the balance of the summer.

That's not a lot of time to get a $1 trillion stimulus deal done, but we think they'll do it, and there's indications they may even exceed our expectations.

We've talked before on this podcast on why a fresh stimulus deal gets done on top of the nearly 2 and a half trillion dollars that's already

been approved this year. In short, it's an election year and Republicans are eager to

protect the economy even if it means ignoring deficit concerns in the short term. The

Democrats are willing partners because providing government assistance in times of crisis

is quarter their brand.

And as for timing, two weeks is probably enough time to get it done.

Congress will likely just recycle elements of plans in existing

legislation and will be eager to do so before presidential election politics take over in the fall.

This argument has only strengthened in recent weeks, as cases of COVID-19 have re-accelerated in the US,

some areas of the country have paused and in some cases rolled back their reopening,

putting the economic recovery at risk. And many of those areas overlap with Republican-leaning electorates.

So it makes sense that Senate Republicans, who initially balked the Democrats 3 trillion

plan and were eager to keep the next stimulus response to no more than one trillion dollars,

may be more willing now to increase that spend.

That means in addition to extending small business aid,

supplemental unemployment benefits, and a new round of state and local government assistance,

...