Morgan Stanley's Michael Zezas on policy catalysts to watch in 2026

Core Insights - The markets have weathered significant policy changes in 2025, and while there are catalysts to watch in 2026, the major policy decisions have largely been made [2][4] - Economic actors' responses to existing policies will be more influential than new policy choices in 2026, with AI capital expenditures expected to contribute 20-25% to growth [3][4] - The Supreme Court's decisions on tariffs and Fed independence could impact fixed income markets, but existing executive authority may maintain policy continuity regardless of midterm election outcomes [6][7][8] Policy and Economic Outlook - Tariffs are currently four to five times higher than previous levels, and tax incentives from recent legislation are expected to positively influence corporate earnings and equity markets [2][4] - The potential for a Supreme Court ruling on tariff authority may lead the White House to seek alternative measures, suggesting limited changes in policy impact [6] - The ongoing tension between federal and local regulations regarding AI development is a critical theme, with expectations of approximately $3 trillion in capital expenditures over the next few years, including $1.5 trillion in debt financing [10][11]