Welcome to Thoughts on the market. I'm Michael Ziziz, 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 US public policy

and financial markets. It's Wednesday, December 18th at 9 a.m. Easter.

US-China trades arguably been the most influential factor in the global

economic outlook this year.

So perhaps it's fitting that we close out the year with a big trade event.

Last week's announcement of a phase one deal and the suspension of terrorists planned for December 15th.

The deal confounded expectations in both directions.

In the run-up to the announcement, speculation grew

that we get the deal rolling back half of all tariffs

based on reporting in the Wall Street Journal.

The real deal was smaller in scope, rolling back only a part of the most recently enacted tariffs from September 1st.

Still, this modestly exceeded our expectations, which were for all existing tariffs to remain untouched.

Putting the expectations aside, what does it all mean for the market and economic outlook?

Surprisingly little in our view.

A deal to avoid December 15 tariffs was in our base case, and we suspect it was the same for most

investors. Further there's still plenty of execution risk going forward. A key part of

the deal is a promise by China to substantially increase its purchase of

US products but disappointment in this topic has led to tariff increases in the past.

Further, phase one covers the issues that were easy to agree upon.

Phase two negotiations, set to commence as soon as possible per the U.S. are likely to be trickier as they tackle industrial policy.

And as market watchers have become aware, negotiating impasses have typically led to tariff increases.

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