Thoughts on the Market

Matthew Hornbach, Morgan Stanley's Global Head of Macro Strategy, discusses the historic rout in bond markets due to increased central bank policy rates. Investors are selling off bonds in anticipation of higher yields, impacting consumers, mortgages, currency exchange rates, and the stock market.

This podcast discusses the factors that challenge the consensus view of a year-end rally in the financial marketplace, including narrow breadth, cautious factor leadership, falling earnings revisions, and fading consumer confidence. It also provides insights into monetary and fiscal policy, stock market performance, interest rate sensitivity, and earnings revision breath.

Morgan Stanley's Chief U.S. Economist, Ellen Zentner, discusses the rising role of women in the economy and the potential impact over the next decade. Topics include changing demographics, lifestyle norms enabling more women to work full-time, and the powerful economic influence of women. A projection of the changing profile of the average American woman by 2030 is also mentioned.

The podcast discusses the evolution of autos towards software-defined vehicles (SDVs), which could offer advantages to new entrants. SDVs are vehicles that manage their operations and add new functionality through software. The progress of the automotive industry's transition to electric vehicles (EVs) and SDVs is explored, along with the benefits and challenges of SDVs. Key milestones to watch for include legacy players releasing their own SDVs and forming partnerships with software companies.

In this podcast, Michael Zezas discusses the impact of recent geopolitical tensions, particularly in the Middle East. He explores the rise in security spending as an investment theme and examines the potential effects of higher oil prices on the global economy and markets.

Mike Cyprys, Morgan Stanley's Head of U.S. Brokers, Asset Managers and Exchanges Team, and Bruce Hamilton, Head of European Asset Management and Diversified Financials Research, discuss the potential impact of Generative AI on asset and wealth managers. They explore how Gen AI is revolutionizing asset management by driving efficiency gains and transforming financial advisory roles, as well as the risks and limitations of AI technology in wealth management.

The podcast discusses the recent rise in long-term yields in the United States and the impact on financial conditions. It explores how the market is tightening conditions for the Federal Reserve and the potential restrain on economic activity. The podcast also examines the implications for inflation, growth, and the Fed's policy, questioning whether the higher rates are temporary or reflective of a stronger economy.

The podcast discusses the recent spike in long-end treasury yields and its implications for the Fed, corporate credit market, and emerging market bonds. The increase in yields is attributed to strong employment numbers and concerns about fiscal deficits, leading to tighter financial conditions. The speaker also touches on the impact of higher yields on interest rate hikes, corporate credit market, and energy market bonds.

This podcast discusses how higher US rates may impact Asia, highlighting that Asia's inflation challenge is not as intense as the US. It is predicted that central banks in Asia may not have to hike rates but could delay cutting rates. The podcast also explores potential triggers for rate hikes in Asia, including high US yields and rising oil prices.

With Congress still without a Speaker of the House, investors should keep an eye on the impact that another potential government shutdown would have on the markets.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the impact of Congress on financial markets. It's Wednesday, October 11th, at 10 a.m. in New York. As of this recording, the U.S. House of Representatives still does not have a speaker following Representative McCarthy's ouster a little over a week ago. Republicans are scheduled to meet today to attempt to nominate the speaker, but until one is chosen, it's unclear that Congress can do any other business. But does that actually matter for investors? Here's two signals from these events that we think are important. First, it signals that Congress is unlikely to deliver any substantial legislation between now and the 2024 election outside of funding bills. Republicans' difficulty choosing a speaker reflects their lack of consensus on many policy issues, including regulation, social spending and more. That further impedes the government's ability to legislate, which was already hampered by different parties controlling the White House and Congress. So for investors who have credited the rise in bond yields and stock prices to expanded fiscal support from the federal government in recent years, you shouldn't expect there to be more on the horizon. The exception to this could be an economic crisis that prompts a fiscal response. But for investors, that means you'd likely see bonds rally and stocks sell off before fiscal support would again become a stock market positive. The second signal, which also cuts against the narrative of government policy support for markets, is that a government shutdown is still a distinct possibility. Congress recently avoided the government shutdown at the beginning of the month by passing a temporary extension of funding into November. But that move only delayed the resolution of key policy disagreements within the House Republican caucus that nearly led to the shutdown in the first place. With the clock ticking toward another shutdown deadline, Republicans are spending precious time selecting a new speaker, and it's not clear they're any closer to resolving their disagreements on key issues such as funding aid to Ukraine. Without that resolution, the risk remains that the House could fail to consider funding bills in time to avoid another shutdown. Now, to put it in context, our economists expect that downward growth pressures from a shutdown event should be modest, and so there are more meaningful factors to consider for markets out there, but certainly this condition doesn't help investors' confidence in the U.S. growth trajectory. And generally speaking, a Congress stunted in its ability to legislate has the potential to become a bigger challenge, particularly if geopolitical events create greater global growth risks. So bottom line, this situation is worth keeping tabs on, but isn't yet something we think should principally drive investors decision making. Thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague or leave us a review on Apple Podcasts. It helps more people find the show.