Speaker · Updated
Ariana Salvatore: latest market views
Morgan Stanley
Summary
Ariana Salvatore is head of public policy research at Morgan Stanley and a regular host and contributor on the firm's 'Thoughts on the Market' podcast, focusing on the market implications of U.S. policy and politics.
Chorus has 20 views from Ariana Salvatore across 4 episodes on Thoughts on the Market (Morgan Stanley) and CNBC Closing Bell since October 7, 2026.
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Newest first. Every quote is checked against the episode's transcript.
Midterms are unlikely to fundamentally change US policy direction, since market uncertainty has come from the executive branch.
Ariana's firm view is that the midterms won't fundamentally change the direction of US policy. The basis is that most policy uncertainty markets have faced since early 2025 has come from the executive branch rather than Congress. She expects tariffs, deregulation, immigration, geopolitics and export controls to remain important sources of policy uncertainty regardless of the election outcome.
“Because our view has been that the midterms are unlikely to fundamentally change the direction of US policy, and that's because a lot of the uncertainty that markets have dealt with since the beginning of 2025 has come from the executive branch rather than congress.”at 1:55
Thoughts on the Market (Morgan Stanley): Signals to Watch in the U.S. Midterms ·
Divided government would make fiscal legislation harder to pass, bringing contentious fights over funding, debt limit and defense.
Ariana argues that congressional control matters most for fiscal policy, unlike other policy areas. A divided government would make new legislation harder to pass. That would likely produce more contentious negotiations over government funding, the debt limit and defense spending. She frames this as the main way the midterm outcome matters for policy.
“Where congressional control matters more is on fiscal policy. So a divided government would make new legislation harder to pass, and that could mean more contentious negotiations over things like government funding, the debt limit, and defense spending.”at 2:23
Thoughts on the Market (Morgan Stanley): Signals to Watch in the U.S. Midterms ·
AI infrastructure & data centers
AI buildout avoids federal prohibition, but its pace and locations will depend on state and local policy.
Ariana's view is that the AI infrastructure buildout is unlikely to face broad federal prohibition, whoever controls Congress. Bipartisan support for AI as a strategic priority, given competition with China, supports that. Local resistance is growing over electricity prices, water use and infrastructure costs. Her base case is a conditional buildout: the investment cycle continues, but the pace and geography of projects depend more on local decisions. That matters for utilities, power generation and the AI supply chain.
“So where that all nets out, what we've been describing is a base case of a conditional build out. The investment cycle continues, but both the pace and the geographic distribution of new projects could become more dependent on local policy decisions.”at 4:32
Thoughts on the Market (Morgan Stanley): Signals to Watch in the U.S. Midterms ·
Midterms may start shaping a 2028-29 tax debate on AI and buildout; markets will price expectations early.
Ariana expects no meaningful federal tax reversal from a change in Congress. The president keeps veto power for the next two years, which creates a big hurdle to major tax changes. The midterms could still start a different tax debate heading into 2028 and 2029, focused on AI and the buildout. Markets can reprice expectations well before any legislation arrives, so tax risk is a forward-looking issue for investors.
“But at the same time, the midterms could start to lay the groundwork for a different tax debate heading into 2028 and '29, specifically around AI and the build out. For markets, expectations can start changing well before legislation actually arrives.”at 5:54
Thoughts on the Market (Morgan Stanley): Signals to Watch in the U.S. Midterms ·
The election is a micro, not macro, catalyst; headline risk often won't change earnings or the macro outlook.
Ariana separates headline risk from real changes to earnings or the macro outlook. Not every political development will have a meaningful market impact. She therefore sees this election as more of a micro catalyst than a macro one. She adds that oversight investigations may follow a change in congressional control, but executive action can continue. That could matter at the margin for technology and energy, through the antitrust and deregulation angles already highlighted.
“But I'd also distinguish between headline risk and actual changes to earnings or the macro outlook. Not every political development is going to translate to a meaningful market impact, which is why we see this election as more of a micro than a macro catalyst.”at 7:08
Thoughts on the Market (Morgan Stanley): Signals to Watch in the U.S. Midterms ·
Midterm voter issues will not carry cleanly into the 2028 presidential race; the transmission channel changes.
Clients ask whether Democratic midterm outperformance predicts 2028. Salvatore says issues like affordability usually don't carry over cleanly. The channel shifts from one election to the next. In 2022 grocery prices drove voter sentiment, and this cycle gasoline prices are the mechanism.
“our view is effectively that the issues don't really carry over from one election to the next. And if they do, it's not in a very clean way.”at 40:47
CNBC Closing Bell: Markets Brace for the Fed as Earnings Roll In 10/27/26 ·
Proposed financial rules will likely be finalized before year-end, so deregulation continues regardless of midterms.
Salvatore says many proposed financial rules will be finalized before the end of this year, possibly even before the midterms. Deregulation is controlled by the executive branch through presidentially appointed agency heads. A Congress flip could add hearings and oversight, but she expects the overall deregulatory agenda to stay intact.
“particularly [the outlook] for financials is really interesting because a lot of the rules that have been proposed are really, in our view, going to be finalized really before the end of this year, even before the midterms in some cases.”at 41:40
CNBC Closing Bell: Markets Brace for the Fed as Earnings Roll In 10/27/26 ·
Deregulation will pull M&A announcements forward ahead of a possibly stricter regime after the next election.
Salvatore expects a pull-forward in deal announcements. Companies will rush to announce mergers before a potentially more restrictive regime after the next presidential election. She sees early signs of this in recent corporate maneuvering, which fits her view that deregulation continues.
“you might see the inverse effect of something like m and a comes up because there is, in our view, going to be a bit of a pull forward in terms of announcements ahead of a new potentially more restrictive regime after the next presidential election.”at 42:17
CNBC Closing Bell: Markets Brace for the Fed as Earnings Roll In 10/27/26 ·
US deficits will expand under every election outcome because spending is the path of least resistance in Congress.
Salvatore argues deficits expand in every scenario: a Republican hold, divided government, or a Democratic sweep. Fiscal policy is the legislative variable, and in a standoff Congress's path of least resistance is to spend more on both sides. So the usual 'divided government means gridlock and fiscal clarity' playbook does not hold this time, and autopilot spending keeps deficits large.
“We think deficit expands in every outcome, even in a republican hold scenario, divided government, and democratic sweep. The primary reason for that is that fiscal is really the legislative variable here. And the path of least resistance in congress, when you see something like a standoff, is really just to kinda spend more on both sides.”at 42:50
CNBC Closing Bell: Markets Brace for the Fed as Earnings Roll In 10/27/26 ·
Morgan Stanley stays constructive on US equities; markets usually perform well in the three to six months after elections.
Salvatore says her firm is still constructive on the US equity market. History shows solid performance in the three to six months after an election regardless of outcome. She adds that this cycle will not follow the easy divided-government playbook. The market also has not yet had a deep pre-midterm sell-off, so a snapback is possible.
“we're still constructive on The US equity market. You know, we tend to see pretty solid market performance in the three to six months after the election regardless of what happens”at 42:50
CNBC Closing Bell: Markets Brace for the Fed as Earnings Roll In 10/27/26 ·
US data center power shortfall grows to 57 GW through 2028, up from 38 GW previously estimated.
Her colleague Steven Byrd and team updated projections and now see a potential 57 GW gap in US data center power through 2028, before accounting for new solutions that could accelerate access to power. That is up from their previous estimate of 38 GW. She cites this scale of the energy challenge as the reason the permitting proposal matters.
“They now see a potential 57 gigawatt gap through 2028, and that's before accounting for new solutions that could accelerate access to power. That's up from their previous estimate of 38 gigawatts.”at 1:12
Thoughts on the Market (Morgan Stanley): The Politics of Powering AI ·
Permitting reform should speed energy projects, but won't fix equipment, labor or grid-capacity constraints.
The bipartisan American Affordability and Jobs Act would reform federal environmental reviews and give greater certainty to projects that have already received approvals. She thinks this can reduce delays and uncertainty around new energy projects. She qualifies this by saying permitting reform alone will not resolve constraints involving equipment, labor, or grid capacity. She also says the eventual policy mix could influence the timing of new projects, and that faster approvals could make some investments more attractive.
“We think that can help reduce delays and uncertainty around new energy projects, although permitting reform alone won't resolve constraints involving equipment, labor, or grid capacity.”at 1:44
Thoughts on the Market (Morgan Stanley): The Politics of Powering AI ·
AI infrastructure & data centers
Federal requirement for data centers to cover transmission costs could shift where projects are built and power sources chosen.
The permitting bill would require data centers to cover their associated transmission costs, moving beyond the voluntary ratepayer protection pledge that hyperscalers signed earlier this year. She sees bipartisan concern about electricity affordability behind this. She argues faster approvals could make some investments more attractive, but forcing developers to absorb extra transmission costs could change where projects are built and which power solutions they pursue. She also says legislation is not guaranteed and the final agreement could differ substantially.
“Faster approvals could make some investments more attractive, but requiring developers to absorb additional transmission costs could also change where projects are built and which power solutions they pursue.”at 3:11
Thoughts on the Market (Morgan Stanley): The Politics of Powering AI ·
AI infrastructure & data centers
Power access and its cost, shaped by policy, may matter as much as AI capex in deciding AI buildout pace.
For much of the AI investment cycle the focus was on technological innovation and capital spending. She argues policy decisions on electricity infrastructure, permitting and affordability could become just as important in determining how quickly that investment becomes operational capacity. For investors, the key question may be how quickly and at what cost companies can secure the power needed, rather than how much they will spend on AI.
“Increasingly though, policy decisions around electricity infrastructure, permitting, and affordability could become just as important in determining how quickly that investment translates into operational capacity.”at 3:47
Thoughts on the Market (Morgan Stanley): The Politics of Powering AI ·
AI infrastructure & data centers
Morgan Stanley's base case is a substantial but conditional AI data center buildout, constrained by power, siting, permitting and community factors.
Base case is a conditional but still substantial AI infrastructure buildout. No broad federal pause is expected because Washington increasingly treats AI compute as strategic infrastructure amid competition with China, and that national security framing supports the buildout. The conditions (power costs, grid investment, siting, permitting, water use, community impact) add friction at the state and local level, but the strategic case for expanding US compute capacity remains intact.
“Our base case is still a conditional build out. We still expect substantial AI infrastructure investment, but increasingly subject to conditions around things like power costs, grid investment, siting, permitting, water use, and community impact.”at 0:55
Thoughts on the Market (Morgan Stanley): Will Midterms Test the AI Investment Cycle? ·
AI infrastructure & data centers
State governors, legislatures and utility commissions may matter more than any single Senate seat for AI data center buildout.
Many of the levers that can delay data center projects (interconnection approvals, large-load electricity tariffs, zoning, water permits, tax abatements) sit with states, utility commissions, and local governments. Governors, state legislatures, and public utility commissions may therefore matter more than control of any single Senate seat. Under divided government, DC gridlock would leave substantive decisions at the state and local level, preserving questions about the durability of the buildout.
“When it comes to AI infrastructure, we actually think governors, state legislatures, and public utility commissions may ultimately matter more than control of any one senate seat in particular.”at 1:43
Thoughts on the Market (Morgan Stanley): Will Midterms Test the AI Investment Cycle? ·
AI infrastructure & data centers
A Republican sweep would be the most constructive midterm outcome for AI data center infrastructure sentiment.
A Republican sweep would likely be the most constructive outcome for AI infrastructure sentiment because investors would expect fewer regulatory constraints, a greater likelihood of active support for permitting reform, additional power generation, and development on federal land.
“At the federal level, we think a Republican sweep would likely be the most constructive outcome for AI infrastructure sentiment.”at 1:57
Thoughts on the Market (Morgan Stanley): Will Midterms Test the AI Investment Cycle? ·
AI infrastructure & data centers
A Democratic sweep would be the least constructive midterm outcome for AI data center sentiment, raising odds of local restrictions.
A Democratic sweep would be the least constructive outcome for AI infrastructure sentiment. She does not expect a nationwide moratorium, but investors could read Democratic outperformance as raising the probability of tighter local restrictions in the near term and potentially much more federal scrutiny after the 2028 elections.
“We think a democratic sweep would be the least constructive outcome for sentiment. Now importantly, that doesn't mean that we expect a nationwide data center moratorium... investors could interpret democratic outperformance as increasing the probability of tighter local restrictions in the near term.”at 2:28
Thoughts on the Market (Morgan Stanley): Will Midterms Test the AI Investment Cycle? ·
AI regulation will stay incremental and fragmented rather than a sweeping federal regime, regardless of midterm results.
The midterms matter much less for broader AI safety and regulation. The expectation is incremental, fragmented regulation rather than a sweeping federal regime. Targeted action on AI safety, data governance, and frontier model oversight is possible, but congressional composition alone is unlikely to trigger comprehensive legislation absent a high-profile safety or security incident, and executive agencies remain the more important actors on tech restrictions and model access.
“Our expectation remains for incremental and fragmented regulation rather than a sweeping new federal regime.”at 2:57
Thoughts on the Market (Morgan Stanley): Will Midterms Test the AI Investment Cycle? ·
AI infrastructure & data centers
The midterms won't decide whether AI capex continues, but can affect buildout friction, timing, costs and investor confidence.
The midterms probably won't determine whether the AI investment cycle continues, because the strategic case for expanding US compute capacity remains intact. What elections can influence is the friction around the buildout: where projects get built, how quickly they are approved, who bears the cost, and investor confidence in the durability of AI capex.
“The midterms probably won't determine whether the AI investment cycle continues. We think the strategic case for expanding US compute capacity remains intact.”at 3:28
Thoughts on the Market (Morgan Stanley): Will Midterms Test the AI Investment Cycle? ·
Shows
- Thoughts on the Market (Morgan Stanley) · 3 episodes
- CNBC Closing Bell · 1 episode
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