Welcome to Thoughts on the market. I'm Michael Zezes, head a public policy 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, January 8th at 9 AM Easter. We start this year as

we ended the last, trying to put US trade policy into perspective for investors.

The president recently stated that he'd sign a phase one deal on January 15th and start work on a phase two

immediately.

So is that the end of the story?

Can investors stop worrying about tariff escalations pressuring markets?

Given all the twists and turns in this negotiation so far, we wouldn't get too comfortable.

First, we're looking to the content of the deal itself, which media reports suggest might not be available until after a deal is signed and may never be fully available.

For example, if the deal focuses more on the idea of best efforts instead of hard targets when it comes to reaching goals about purchases of U.S. products

and intellectual property protections, that could be caused for concern.

It would mean there's plenty of room for misinterpretation on both sides and ultimately a renewal of tariff tensions.

Second, we're looking at the onset of phase two negotiations.

Normally, one would think fresh negotiations are a good sign.

Communication is key to resolving all manner of conflict.

But in our view, phase two negotiations introduce some risks to the trade piece that's been achieved.

That's because phase one address the low-hanging fruit in the negotiations, while phase two addresses issues where both sides are far apart like

industrial policy.

So, strangely enough, we'd view a delay in negotiations positively, at least in the short term,

as the last phase one an opportunity to work and build benefits

to both sides, making it more costly to re-escalate tensions amidst what's likely to be a tough

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