Speaker · Updated
Monica Guerra: latest market views
Morgan Stanley Wealth Management
Summary
Monica Guerra is Head of Policy and Geopolitical Strategy at Morgan Stanley Wealth Management, where she drives public policy and market research and previously worked in municipal research, at Fitch Ratings, and in New York City government.
Chorus has 7 views from Monica Guerra across 2 episodes on Thoughts on the Market (Morgan Stanley) and CNBC Power Lunch since October 26, 2026.
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Affordability is the defining midterm issue, leaving the incumbent party in a challenging environment.
Monica argues affordability has become the defining issue for voters this cycle. Her signal monitor tracks four indicators: the generic ballot, presidential approval, consumer sentiment and gasoline prices. Democrats lead the generic ballot by about eight points. Presidential approval is 38.8%, below the 40% reference point where the opposition tends to gain. October consumer sentiment is the lowest for any pre-midterm October in the University of Michigan survey's history. September gasoline prices were up 37.6% year over year. Persistent inflation, high borrowing costs and Iran-related energy pressure weigh on purchasing power. She notes these are directional indicators, not an outcome forecast.
“So taken together, these signals point to a challenging environment for the incumbent party, really driven by affordability.”at 1:28
Thoughts on the Market (Morgan Stanley): Signals to Watch in the U.S. Midterms ·
Narrow breadth plus tech and energy strength could amplify policy-driven volatility as the index runs ahead of history.
Monica notes the S&P 500 has averaged about a 14% return in the calendar year after a midterm, versus roughly 3% in the midterm year. This year the index has already outperformed that typical second-year path. She argues that recent strength in technology and energy, combined with narrow breadth, could amplify policy-related volatility, especially in industries facing heightened scrutiny under the new Congress. She stresses this is not a forecast and warns against trading on historical election patterns.
“And this year, as we all know, the index has already outperformed that typical second year trajectory, which could heighten risks and opportunities for sectors sensitive to policy decisions. For example, recent strength in technology and energy combined with the narrow market breadth could amplify policy related volatility.”at 3:17
Thoughts on the Market (Morgan Stanley): Signals to Watch in the U.S. Midterms ·
Local data-center policy could affect municipal bond issuers, depending on who captures benefits and who pays costs.
Monica argues that the electricity-cost and data-center issue has local investment effects. Households first feel it through electricity bills. It can also affect local issuers and the municipal bond market. The outcome depends on whether a community and its local government capture the benefits of new investment or absorb the infrastructure costs. That is why she says investors should follow what state and local governments actually do.
“For individual, the concern often begins at home with the electricity bill, but it can also have implications for local issuers and the municipal bond market, depending on whether a community and local government captures the benefits of new investment or absorbs the infrastructure costs.”at 5:02
Thoughts on the Market (Morgan Stanley): Signals to Watch in the U.S. Midterms ·
Assuming divided government means less policy volatility is the biggest risk for investors.
Monica argues that investors may underestimate policy volatility after the election. The common view is that divided government means gridlock, and gridlock brings clarity for markets. Ariana adds the caveat that oversight investigations and political scrutiny can rise even if Congress changes hands, and executive action can continue. That matters for technology and energy, where antitrust and deregulation are live issues. Monica treats assuming less volatility as the key mistake.
“I think the biggest risk is actually assuming that divided government automatically means less policy volatility.”at 6:28
Thoughts on the Market (Morgan Stanley): Signals to Watch in the U.S. Midterms ·
AI infrastructure & data centers
Local opposition to data centers smooths capex over a longer runway rather than killing the buildout.
Guerra argues that opposition to data centers is more likely to be good for the buildout over the long run than harmful. Moratoriums rather than outright bans would spread out capex instead of producing a boom-bust cycle. Local governments would then have more interplay with the private sector and an incentive to back capex, through grid improvements, offsets, or direct subsidies on electricity bills. The result is a slower but longer runway, with less enthusiasm but still a build-out. She expects the data centers to get built even under a more Democratic-leaning Congress and state governments, because states and localities face a shortage of revenue and see data centers as a politically expedient way to gain grid improvements and productivity benefits.
“I would actually take it the other way that opposition can actually be good for data centers over the long run. Rather than getting sort of an immediate boom bust approach on capex, it could actually spread or smooth capex coming to market. Meaning, you get moratoriums rather than bans.”at 39:09
CNBC Power Lunch: Previewing Big Tech Earnings, Anthropic IPO Announcement, Countdown to Midterms 10/26/26 ·
Democratic scrutiny of private equity, especially in healthcare, brings headline risk but not lasting fundamental damage.
Guerra sees the private equity space as an opportunity where bad political news could be good news for investors who stay in quality names. A Democratic-led Congress would likely drill down on the sector with hearings and more investigation, particularly in healthcare, where PE firms may face scrutiny. She says PE firms will work through their margin-improvement playbook, using this period in Congress as a testing ground for what will work in 2028 and 2029. Because legislation will be hard to pass, a negative headline does not necessarily mean negative fundamentals.
“news could be good news opportunity is in the private equity space. If you're staying up in quality, you're gonna have a democratic government that's gonna essentially drill down, maybe have hearings, do more exploration... you may get a negative headline, but it doesn't necessarily mean negative fundamentals”at 41:09
CNBC Power Lunch: Previewing Big Tech Earnings, Anthropic IPO Announcement, Countdown to Midterms 10/26/26 ·
Divided midterm government means little legislation passes, so markets should welcome gridlock despite headline volatility.
Guerra expects a Democratic Congress with a Republican president, who is likely to veto policy, to produce legislative stability. Investigations and hearings will generate headlines and some volatility, including sell-offs or rallies on White House posts, but she says these are pockets of volatility rather than a change in the trend. She argues that very little of substance will get done in the next two years, including AI and data-center legislation, which will be very hard to pass. So negative headlines do not necessarily mean negative fundamentals, and she expects the stock market to like the gridlock.
“Nothing's gonna happen for the next two years. Nothing's gonna happen. I mean, literally, legitimately, there's gonna investigate Trump... but nothing of substance is gonna get done. And the stock market will probably like that.”at 42:20
CNBC Power Lunch: Previewing Big Tech Earnings, Anthropic IPO Announcement, Countdown to Midterms 10/26/26 ·
Shows
- Thoughts on the Market (Morgan Stanley) · 1 episode
- CNBC Power Lunch · 1 episode
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