Welcome to Thoughts on the market. I'm Michael Zezes, head of public policy and municipal strategy for Morgan Stanley.

Along with my colleagues bring you a variety of perspectives, I'll be talking about the intersection between U.S. public policy and financial markets.

It's Wednesday, January 22nd at 9 a.m. Easter.

While we continue to have many conversations with investors about the 2020 election, we've noticed complacency creeping into those conversations.

Usually it stems from the idea that the election won't be much of a contest because the economy is good,

and incumbents win when the economy is good.

But is that really a reliable rule of thumb?

In our view, the answer is no,

and investors would be wise not to assume

a good economy means that the current president will be reelected.

Here's three reasons why.

First, the evidence suggests that it's possible a good

economy is not a sufficient condition for an incumbent to win. While it's true that most

incumbents who have been reelected enjoyed strong economies, this is a small sample size.

Given that 243 of the last 279 quarters going back to 1950 have shown positive GDP

growth, it's entirely possible that incumbents winning is just coincidental with a good economy.

Said another way, we can't conclude that other factors aren't at play.

Second, incumbent presidents with good economies who have been reelected have generally also had net positive

approval ratings for most of their tenure. Finally, it's also possible that the

economy might matter less to voters than is commonly thought. According to

Gallup, Americans naming the economy as their

top concern is at a 20-year low. More are citing concerns about health care,

...