Welcome to Thoughts on the Market.

I'm Michael Zezis, Head of Public Policy Research and Municipal Strategy for Morgan Stanley.

Along with my colleagues bring you a variety of perspectives.

I'll be talking about the intersection between US Public Policy and Financial Markets.

It's Wednesday, March 17th at 11 a.m. in New York.

Roughly one year on from the onset of the COVID crisis, the American Recovery Plan has been

signed and another round of stimulus checks are quite literally in the mail for most Americans.

State and local governments are also set to receive ample aid.

All told, $1.9 trillion of economic aid was approved, with $1.2 trillion of its schedule to be spent this year alone.

It's hard to conceptualize how substantial this is, but here's three numbers that can help.

Let's start with the number three, specifically three times.

This package is roughly three times bigger than the estimated remaining gap between actual and potential GDP in the US.

The next number up is $1 trillion.

After the passage of this package, our economists estimate that the fiscal response will have exceeded the total economic impact by at least this much.

The third number is $2.3 trillion.

That's the estimate from our economists of how much excess household savings will have been built up as a result of the total fiscal response to COVID.

Although they expect households will only spend a portion of that, the boost to consumer activity would be very substantial.

With numbers like these, it's no wonder our economists now see US real GDP growth for 2021 exceeding 8% and then settling at an above trend 2.8% in 2022.

For investors, we see two takeaways.

First, stick with the reflation theme, meaning equities should continue to perform in particular those that do well early in the cycle, like industrials, and now those that do well in the middle of cycles like autos.

The second takeaway is a more general one, never sleep on Washington DC.

Market performance owes a lot to the DC response to COVID.

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