LIVE MARKETS-As Trump nears inauguration, what to watch for on Day One

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AS TRUMP NEARS INAUGURATION, WHAT TO WATCH FOR ON DAY ONE

U.S. President-elect Donald Trump is due to take office on Monday and investors will be closely watching for policy announcements that are likely to set the tone for markets in the coming months. Morgan Stanley public policy and macro strategists say this is what to watch for on Day One.

1. A lot of executive orders. The bank notes that reports suggest there could be 100 executive orders or more. But “it's unclear how much signal there will be amidst the noise on the four policy channels we're watching for markets: regulation, tariffs, immigration, and taxes.”

2. Tariffs. Morgan Stanley will focus on any actions that could signal greater real-time optionality for raising tariffs, which could increase uncertainty on how markets price for their impact, and/or a faster, more severe approach to tariffs, which could impact how markets price in growth expectations.

3. Legislative policy and timing. As Republican leaders speak to the press, the bank will watch for any signals on legislative policy and timing.

4. Pace of tariff announcements and implementation. “Contrary to our base case of fast announcements and slow implementation of tariffs, we think most investors fear the prospect of fast announcements and fast implementation – concerns we think market prices already reflect from a probabilistic standpoint.”

5. If executive orders surprise investors with a faster implementation of tariffs than are priced in, or larger than expected increases, then Morgan Stanley expects shorter-dated U.S. Treasury yields to increase and outpace increases in longer-dated debt. The U.S. dollar will also likely appreciate, particularly against the Chinese yuan, Canadian dollar and Mexican peso.

(Karen Brettell)

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