Morgan Stanley says US policy under President Donald Trump has become clearer after months of uncertainty, giving investors a better sense of how trade, fiscal, and regulatory changes may affect markets.
In a note by Michael Zezas, the bank’s head of US public policy and municipal credit strategy, analysts say a “durable consensus” is emerging on key issues 250 days into Trump’s second term. They note that policy shifts introduced in early 2025 are proving more structural than temporary, with lasting effects on trade, industrial strategy, and market behavior.
Policy Uncertainty Eases
The report notes that while global trade tensions remain high, policy uncertainty has dropped from early 2025 peaks. Recent trade deals have paused tariff escalations, though the White House retains the authority to re-impose duties if partners fail to meet US targets. Legal challenges, including potential Supreme Court action, are unlikely to produce quick changes.
Industrial Policy Gains Ground
Morgan Stanley highlights a shift away from the decades-old “Washington Consensus,” which favored free trade and limited state intervention. Both parties now appear to accept tariffs and industrial policy as strategic tools. Examples include new licensing fees on some China-bound exports and government stakes in semiconductor production.
Key Market Implications
The bank identifies three main trends for investors:
- Capital markets revival: IPOs and mergers are rebounding sharply from low levels, supported by strong corporate balance sheets and narrower policy risks.
- Steeper yield curves and weaker dollar: Persistent trade barriers, a stable fiscal outlook, and a Fed willing to tolerate some inflation suggest higher long-term yields and continued dollar softness.
- Global supply chain shifts: Trade barriers and a move toward a multipolar world are driving investments in Asia and other regions, particularly in batteries, robotics, and other critical technologies.
Morgan Stanley warns that while these trends appear durable, investors should monitor how markets price in the policy environment as economic conditions evolve.
