Welcome to Thoughts on the market. I'm Mike Wilson, Chief Investment Officer and Chief

U.S. Equity Strategist for Morgan Stanley. Along with my colleagues bringing a variety

of perspectives, I'll be talking about the latest trends in the financial marketplace.

It's Monday, October 26 at 11.30 a.m. in New York, so let's get after it.

As we enter the final week of the U.S. elections,

equity markets remain stuck in the same range in which they have traded since early September.

To be more specific, the S&P 500 has been unable to make a new closing high for the past nine weeks,

the longest such period since this new bull market began in March.

This does not mean the bull market is over.

To the contrary, we view the past few months as a healthy consolidation of the

initial leg of this bull market that is likely to run for years, not months.

Nevertheless, there are some very real concerns the equity market needs to deal with before it's likely to break out to new all-time highs later this year or early in 2021.

First is the election next week. Here we have two risks for the equity market to consider,

the outcome itself and the timing of that outcome. The markets are starting to anticipate a

Joe Biden win. It's also starting to lean toward the Democrats winning enough seats in the Senate to take full control of Congress.

Such a blue wave is likely to usher in major policy changes.

Chief among the concerns is taxes on both corporations and individuals.

There is also a view that the Democrats will be less business-friendly with

regulations, especially for banks and traditional energy companies.

The offset is that Democrats may be more generous with fiscal stimulus than the Republicans,

and that means stronger economic growth, at least next year.

This, however, would be inflationary and lead to potentially higher long-term interest rates,

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