Morgan Stanley has released a big report on the "Big Debates" of 2017, which highlights the key questions they think will shape global markets over the next 12 months.
Will protectionism hinder US growth? Will the bank stock rally continue?
Business Insider breaks down nine debates that will dominate Wall Street in the new year.
1. Will protectionism hurt US growth?
There has been a major shift in American politics, on both sides of the aisle, away from free-trade and economic liberalism towards protectionism.
While most analysts are in agreement that protectionist policies will negatively affect emerging markets such as Asia, there is not a consensus on its implications for the US.
Morgan Stanley is not taking an optimistic stance:
"Under a more protectionist regime, there is potential for near-term upside in US growth, driven entirely by a narrowing of the trade balance. However, this would come at a cost of permanent output loss."
2. Will we see corporate tax reform?
It is very likely that there will be corporate tax reform in the US in 2017, according to Morgan Stanley, but what that reform will look like and the degree to which it will benefit the economy is still up for debate.
"The good news for investors and the economy is that Congress has the motive and the opportunity to execute tax reform in 2017 ... the bad news is that this stimulus may lack punch given the likelihood of resulting Fed hawkishness and potential corporate finance disruptions," the bank said.
3. Will border adjustments lead to an appreciation of the USD?
One of the cornerstones of Donald Trump's campaign was a promise to impose taxes on imports into the US, or border adjustments, in order to buoy America's ailing manufacturing sector.
Traditionally, Republicans have not been in favor of implementing such taxes, but as of late it looks like some key GOP legislators have had a change of heart.
"Recent news suggests House Republicans and President-elect Trump are coming together around [border adjustments]," the bank said.
As such, Morgan Stanley believes border adjustments stand a serious chance in 2017.
However, they don't subscribe to the popular opinion that border adjustments would have a profound affect on FX markets.
"We believe border adjustment would not result in a full exchange rate offset (i.e we don't expect USD appreciation of 25%) ... instead we think a 10-15% rise in USD is reasonable," the bank concluded.
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