Welcome to the thoughts on the market. I'm Michael Zezes, head of public policy research

and municipal strategy for Morgan Stanley. And I'm Matthew Hornbach, Global Head of

Macro Strategy at Morgan Stanley. And on this edition of the podcast, we're talking about the political economy,

how Democratic Party Control the White House and Congress could affect interest rates and FX markets this year.

It's Friday, January 15th at 10 a.m. in New York. So our policy research is really about

solving the last mile problem for investors when dealing with DC, connecting policy choices

and investment decisions.

Why do you think politics and policies become more influential

to the markets that you're covering?

Well, Michael, since the Georgia runoff elections,

we have a different outlook on the fiscal policy trajectory of the

United States government. And fiscal policy has a very important link to what happens in the interest rate marketplace

as well as what happens in the currency markets.

In particular, with fiscal policy often comes US Treasury issuance and if that

issuance that arrives alongside fiscal deficits is not previously expected by the

marketplace, you should expect to see reaction in both government bond

markets and in currency markets.

Yeah, I think if we take this back all the way to 2017,

you've seen a very different trajectory

for US fiscal policy over the last few years.

Typically it's unusual that you would see Congress approving major deficit expansions,

but we had one in 2017 and 2018 with the Tax

...