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 US public policy and

financial markets.

It's Wednesday, July 31st at 9 a.m. East Germany.

Negotiators from the US and China meet this week to try and make progress toward a trade deal.

We're not expecting a major breakthrough in the short term,

but it's possible enough progress is made to stave off another increase in tariffs for a little while.

If that's the case, it begs a key question for investors.

Is that good enough progress to restore business

confidence and spending? Those are two forward-looking indicators that have been

trending down showing potential for the economy to slow further. In our view the

answer is probably not. That's because trade policy

uncertainty is broader than just the US and China. This underscores how

companies are having to think twice about existing overseas operations and move

slower to invest across borders.

It's all in line with our slobilization thesis, the idea that Geo politics is contributing to uncertainty in global commerce.

Consider the World Trade Organization, or WTO. Here Here the US is demanding changes to rules

that it argues disproportionately favor countries like China and Mexico. This could

contribute to greater trade uncertainty Europe also remains a hot spot for potential trade conflict. Trade negotiations. trade tariffs coming this November. In the meantime, France recently passed a tax that largely targets

U.S. tech companies and the U.S. administration that said it may respond with new tariffs

and taxes. So bottom line, it's not the most stable time for companies to be making decisions on the global scale.

Not surprisingly, our economists think the downtrend and corporate confidence and spending could continue.

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