Welcome to the thoughts on the market. I'm Michael Zezes, head the Public Policy Research 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, November 11th at 11 a.m. in New York.

We interrupt our discussion of the U.S. election to highlight something that's at least as important to the

economy and markets. Fresh news on the development of a COVID-19 vaccine from a

leading pharmaceutical company where early data shows over 90%

effectiveness. If this carries forward into a successful vaccine,

there's some key read-throughs for investors in equity and fixed income markets.

Importantly, it underscores the view of our colleagues that vaccines are likely to be a key reason that the

U.S. economy will be able to continue its impressive rebound next year.

Accelerating case counts suggests the next few months will still be challenging, but

there's greater certainty that the vaccine will be available that will

over time enable governments to loosen restrictions on activities beyond what was already

done this year. That's good for commerce. In the view of our strategists, that's also good for equity markets, which should be driven higher over the course of 2021, led by cyclical and growth stocks.

Yet it's a challenge for bonds where this improving growth and ultimately inflation trajectory should continue to push Treasury yields higher.

One bond market we think could outperform though is the Muni bond market.

Although it's already recovered nicely from substantial market stress earlier this year, there could be more room to outperform

versus treasuries in the near term on this vaccine news.

That's because many of the performance laggards in the meaty bond market were cities and transit agencies,

places whose economies were reliant on urban population

density. Of course, social distancing is the enemy of population density, but if vaccines are

highly effective, then density can quickly return.

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