Morgan Stanley
  • Thoughts on the Market Podcast
  • May 5, 2021

Texas vs. California

With Michael Zezas
U.S. Public Policy Research for Investors


Welcome to Thoughts on the Market. I'm Michael Zezas, Head of Public Policy Research and Municipal Strategy for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about the intersection between US public policy and financial markets. It's Wednesday, May 5th, at 9:00 a.m. in New York.

Texas versus California. No, we're not talking about a college football game, we're talking about a Supreme Court case; one where the ruling should be issued any week now - and investors should pay attention.

The case is about the Affordable Care Act, or what the media commonly calls ‘Obamacare’. The law could be struck down if the court rules in favor of Texas. While most court watchers deem this unlikely, it's not impossible, and if it happened, then health care coverage could be in question for about 20 million Americans who gained it under Obamacare.

If this were to happen, we'd expect the focus of Washington, D.C. to immediately turn to addressing this issue as quickly as possible, with Democrats pushing to remake the Affordable Care Act, but this time with a public option and a lower Medicare eligibility age - two factors that could benefit the market for the larger managed care stocks.

But this is more than a sector story. Rebuilding Obamacare would take a lot of time and negotiation, likely delaying the $4T Build Back Better infrastructure plan, whose fiscal boost is largely expected by investors across macro markets. Not having Build Back Better wouldn't be a substantial economic problem, but would dampen expected growth in the near term. The takeaway then is this: a win for Texas at the Supreme Court could then be a win for bondholders, and a loss for stockholders, at least in the short term as markets adjust to a new growth trajectory.

And if you're looking for more information about the impact of the Build Back Better infrastructure plan, please check our latest update at

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The Supreme Court is expected to deliver a decision soon on this key case for the future of the Affordable Care Act and the 20 million Americans who have acquired coverage under it. The outcome could have significant impacts for investor too.

In this Thoughts on the Market series, Michael Zezas offers perspective on how U.S. public policy affects equity and fixed income markets, including trade tensions, infrastructure and government policy. Listen to this week’s update.

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