“Too soon to declare the ‘all clear,’ the market will likely remain volatile and idiosyncratic,” says Lisa Shalett, Chief Investment Officer at Morgan Stanley
The stock market selloff has laid bare a crisis of confidence on Wall Street over Washington’s policy direction, and tax-cut optimism — even the cuts themselves — may be not enough to lift investor spirits.
“The pace and sequencing of policy reform appear to have structurally impaired confidence, impeding growth forecasts,” said Lisa Shalett, Chief Investment Officer at Morgan Stanley, in a note to clients.
Meanwhile, the policy pivot to deregulation and tax relief Wall Street has been banking on since the election remains elusive. The problem isn’t just politics; the math simply doesn’t add up.
Even under the Republican base case, the cost of extending existing tax cuts is pegged at $4.5 trillion over the next decade. That’s more than double the proposed spending cuts of $1.5 to $2.0 trillion, much of which would have to come from Medicaid and Medicare.
