Morgan Stanley Fixed-Morgan Stanley Global Macro Forum Navigating a Noisy Electi...-108734238.pdf

MorganStanleyGlobalMacroForumNavigatingaNoisyElectionJune17,2024MichaelZezas–GlobalHeadofFixedIncomeResearch|StrategistArunimaSinha–GlobalEconomicsTeam|GlobalEconomistToddCastagno–HeadofGlobalValuation,Accounting&Tax(GVAT)|GVATStrategistMatthewHornbach–GlobalHeadofMacroStrategy|StrategistKristineLiwag–SeniorAerospace&DefenseEquityAnalyst|EquityAnalystMORGANSTANLEY&CO.LLCMorganStanleydoesandseekstodobusinesswithcompaniescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanleyResearch.InvestorsshouldconsiderMorganStanleyResearchasonlyasinglefactorinmakingtheirinvestmentdecision.Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.MorganStanleyResearchGlobalJune17,202411:10AMGMTMichaelZezasGlobalHeadofFixedIncomeResearchIt’saCloseRacePredictionmarketsimplyatightracebetweenPresidentBidenandformerPresidentTrump.Source:Bloomberg,Predictit.org,MorganStanleyResearchExecutivePolicyChoicesImmigrationandtariffsaretopicareaswithkeypolicydifferencesbetweenPresidentBidenandformerPresidentTrump.Source:MorganStanleyResearchDeficitScenariosSource:MorganStanleyResearchThelargerdifferencebetweenthetwosweepscenariosisevidentoverthelongertermthantheshorterterm.ArunimaSinhaGlobalEconomicsTeamEconomicEffectsofImmigrationPoliciesSource:MorganStanleyResearchChart(pastedasanimage)ImmigrationElectionOutcomesSummaryofPolicyActionTimingofPolicyActionGrowthInflation•Stricterborderenforcementvialeverageofexecutiveauthorities,excludingactionsthatcourtshavepreviouslydisallowed+someimplementationofnewauthorities1H25Negative/NeutralPositive/Neutral•Executiveauthoritiesutilized•Possiblebipartisanborderagreementpassedandenforced1H25Negative/NeutralPositive/Neutral•Executiveauthoritiesutilized•Possiblebipartisanborderagreementpassedandenforced1H25Negative/NeutralPositive/Neutral•Stricterborderenforcementvialeverageofexecutiveauthorities,excludingactionsthatcourtshavepreviouslydisallowed+someimplementationofnewauthorities•PossibledeportationofmigrantswhoarealreadyintheUS1H25NegativePositiveDemocraticSweepDivided-DemPresidentDivided-RepublicanPresidentRepublicanSweepDirectionalImpactstoMacroVariablesEconomicEffectsofTariffPoliciesSource:MorganStanleyResearchChart(pastedasanimage)TariffsElectionOutcomesSummaryofPolicyActionTimingofPolicyActionGrowthInflationUnlikelytoseenew,impactfultariffaction-NeutralNeutralUnlikelytoseenew,impactfultariffaction-NeutralNeutralExpandeduseoftariffs1H25NegativePositiveExpandeduseoftariffs1H25NegativePositiveDemocraticSweepDivided-DemPresidentDivided-RepublicanPresidentRepublicanSweepDirectionalImpactstoMacroVariablesCBOProjectionsImplyRisingDebt/GDPLevelsSource:CBO,USTreasury,BEA,MorganStanleyResearchToddCastagnoHeadofGlobalValuation,Accounting&Tax(GVAT)TaxPolicyScenariosbyOutcomeSource:MorganStanleyResearchUSCorporateTaxPolicyExposureMapSource:Calcbench,FactSet,MorganStanleyResearchMatthewHornbachGlobalHeadofMacr