Thanks for listening. I'm currently out on vacation, but I wanted to make sure you didn't miss my earlier episode.

The analysis I provided holds every bit as true today as it did then.

Welcome to thoughts on the market. I'm Michael Zezes, head of Public Policy 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.

In the last week, clients have been asking a lot of questions about how policies like Medicare

for all, a rollback of tax cuts, or a rollback of other recent regulatory changes could

undo some of the market gains of the past few years.

It's a valid question to ask.

We're going to be rolling out research to answer this question more precisely in the

coming months, but here's something to consider in the meantime.

Whether you're concerned about either side's policies impacting the market,

you have to calibrate your concern not just to that party's chances of occupying the White House,

but also both houses of Congress.

That clears a path to transformative policy change, the kind that can have a real impact on markets. Right now, betting markets say there's about a 10% chance for each side that such a path could open.

But even when it is open, that doesn't mean transformative policy change is a done deal. History shows that the president only gets one-third to one-half of their campaign promises made law in their first year. That pattern played out with the current administration,

which executed a major tax reform,

but was unable to complete a major health care overhaul

or infrastructure package.

So while investors shouldn't bake a transformative policy

into their base case, at least not yet,

there's some sectors to be aware of that could show extra volatility as campaign season progresses.

One example we expect is health care.

...