Welcome to Thoughts on the Market. I'm Andrew Sheets, Chief Cross Asset Strategy

for Morgan Stanley. Along with my colleagues bring you a variety of perspectives,

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

It's Friday, July 31st at 2 PM in London.

In the second quarter of 2020, the US economy shrank by 9.5%. That was the largest

quarterly decline on record and it was so by some margin. Previously the

worst quarter for the economy had been a 2.6% decline way back in 1958 and in the teeth of the financial crisis

the fourth quarter of 2008 the economy shrank by 2.2%. So this recent decline

is more than three times worse than either of those episodes.

It means that the current recession has now wiped out all of the growth in the U.S. economy since 2014.

The good news is that we think the worst of this recession is now behind us and that the economy is growing again.

Indeed, my colleague Alan Zentner, Morgan Stanley's chief U.S. economist, thinks that growth in the third quarter may register as one of the strongest levels on record,

helped in part by just how low the current starting point is.

But August and September still present a number of challenges.

Importantly, we think several recent developments could give investors pause and create an incentive to keep

more money on the sidelines.

First, any economic recovery from this recession is going to be very closely linked to the spread of COVID-19 and here

our projections are getting worse, not better.

Initial progress on a vaccine has been promising but key data for phase three trials may not be available until October or November.

For more on these worsening projections, as well as the race to find a vaccine,

please see our earlier episode where I chat with my colleague Matthew Harrison. The second issue is fiscal

support. As bad as this recession is it would have been much worse without an incredible

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