Welcome to Thoughts on the Market.
I'm Michael Zezis, Morgan Stanley's Global Head of Fixed Income Research and Public Policy Strategy.
Today, we'll be discussing what investors need to focus on amidst all the U.S. policy headlines.
It's Friday, March 7th, at 12.30 p.m. in New York.
In recent weeks, the news flow on tariffs, immigration, and geopolitics has been relentless,
culminating in this week's State of the Union Address by President Trump and,
if headlines hold, a partial reversal in course on Mexico and Canada tariffs that were just levied earlier this week.
Understandably, measures of policy uncertainty, such as the Baker, Blumen,
Davis index have reached all-time highs, and this tracks with the confusion expressed by investing in corporate clients.
In our view, this policy noise is going to continue.
But there is an important signal.
These developments track with one of our four key themes of 2025, the transition toward a multipolar world.
The tense White House meeting between President Trump and Zelensky, played out live in front of the news cameras,
was another reminder that the U.S. is evolving its role in driving international affairs.
And tariffs on Mexico, Canada, and China are a reminder of the U.S.'s interest in rewiring global trade.
The reasons behind this are myriad and complex, but in the near term, it's about the U.S. looking more inward.
Economic populism is, well, popular with voters in both parties.
There's a few net takeaways for investors here.
One is a positive for the European defense sector.
The combination of tariffs and the evolving U.S. posture on global security has long been part of our thesis on why Europe would eventually chart a new path and step up to spend more on defense.