Morgan Stanley IM: The Big Easy

• The “Big Easy” is the nickname for New Orleans, Louisiana, but in this case refers to the “big easing” of both fiscal and monetary policies.
• Monetary policy easing is thought to be needed to support the labor market, and while true, there is another reason lurking – to avoid the risk and vulnerabilities of a liquidity squeeze.
• Fiscal policy easing may be seen as corporate tax relief and again, while true, what lurks is a foreign policy angle related to tariffs and geopolitical influence, i.e., the cost of tariffs needs to be offset to fund foreign policy matters.
• All in all, this is not just a simple game of economic relationships. There is something deeper at work that may keep easy policy at work for longer.
• This may produce an underappreciated boost for asset prices, thus suggesting that expensive valuations are not so expensive at all.

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