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, June 26th at 9 a.m. Easter. One of the things I

find fascinating about financial markets is that every trade represents a

disagreement.

The buyer of a stock is arguing they expect the price to go higher.

The seller is expressing the opposite view.

Disagreement and debate is what makes markets.

And these disagreements are repeated countless times throughout the day with each trade, across asset classes and across the globe, painting a picture of the world's expectations on nearly every topic affecting humanity.

So to be an investor is to pick aside in the key market debates of the day.

It's unavoidable as even the act of staying out of the markets when you have the ability to invest is

implicitly expressing a view of the world.

So what's the essential market debate today?

In our view, it's about how the economy reacts to US-China trade tensions.

In one camp, there are plenty of investors that argue that trade escalation sound a lot scarier than they actually are.

For example, levying 25% tariffs on 300 billion dollars of imports from China amounts to only

$75 billion of impact on a $20 trillion U.S. economy that just posted GDP growth above 3%.

Additionally, the Fed's recent comments state that they stand at the ready to ease if need be,

and that might be more powerful than $75 billion of new tariff costs.

Sounds compelling, but we're in the other camp.

It's true that the direct costs of new tariffs are relatively small, and we're not arguing

...