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.

It's Wednesday, September 18th, at 9 a.m. Eastern.

The U.S. and China are talking again about trade.

Goodwell gestures have been exchanged to pave the way for October talks, most notably a delay in U.S. tariffs that were set for October 1st.

Talking is a good thing. After all, game theory states that communication is key to breaking a prisoner's dilemma,

and so a further delay or pause in tariffs

has become a real possibility, a welcome sign

for the US economy, which is starting to strain.

Look no further than the recent ISM report

on manufacturing showing a shrinking of the sector for the first time in three years.

But while talking is good, it's not sufficient for trade tensions to truly ease and reverse the decline we're starting to see in some key economic indicators.

So it's important to separate the signal from the noise and trade headlines.

Which are the real deal and point to an outcome giving the U.S. economy a chance to rebound.

Let's start with the real stuff.

The test for us is whether or not any arrangement in the coming weeks meets the threshold of a durable pause in tariff escalations.

All three prior pauses have been followed by re-escalation of trade tariffs, so something would have to be viewed as different this time to interrupt

the cycle of sagging corporate confidence, falling cap-backs, and labor weakness that our economists think is in motion.

What could signal that something is different? A meaningful concession likely preceded by one of three circuit breakers.

First, obvious weakness in risk assets. Second, obvious weakness in economic data.

Or third, an obvious increase in political risk.

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