Welcome to Thoughts on the Market.

I'm Andrew Sheets, Chief Cross Asset Strategy

from Morgan Stanley.

Along with my colleagues bringing you a variety of perspectives,

I'll be talking about trends across the global investment landscape and how we put those

different ideas together. It's Friday, July 19th at 2 p.m. in London. In my last episode, I discussed

why we've recently downgraded equities to underweight. A big reason for this

change was simple. We hold our lowest equity recommendation in five years

because our investment framework projects the lowest risk-adjusted returns for

equities in five years. But like any view there are risks.

What follows is a discussion of the key areas of disagreement between other

investors and our own view, how we address those and the developments that would

make us most worried about

being wrong. The first point of contention is around central banks and

whether their support will continue to push markets higher. The Federal Reserve is

expected to cut interest rates at the end of this month,

and our economists expect the European Central Bank to embark on a second round of

quantitative easing later this year. With stocks near recent highs,

the market seems confident that the support will outweigh any other challenges.

We disagree. As we've noted on earlier episodes of this program, we think a regular lesson of the last 30 years is that when central banks have eased policy

while data has weakened, weaker data has frequently won out. And then there's the issue of how much

Central Bank support is already expected. Over the course of 2019 markets have steadily expected more and more aggressive action

...