Welcome to Thoughts in the Market.

I'm Andrew Sheetz, Chief Cross-Asset Stragist for 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 ideas together.

It's Friday, September 10th at 2pm in London.

We recently downgraded U.S. equities to Underweight, a shift that brings our global equity view down

to neutral.

I wanted to talk about why we made this change, what we're watching, and what it might

mean for investors.

The why for this change is simple.

We see poor risk-adjusted returns for U.S. equities relative to other asset classes.

My colleague Michael Wilson, Morgan Stanley's Chief Investment Officer and Chief U.S.

Equity Stragists forecast that the U.S. market will decline about 5% through the middle

of next year.

Another method of estimating return based on market valuation in the state of the economy

is a little more optimistic, but not by much.

Taken together, they suggest that U.S. equities now offer the lowest return of any major stock

market that we cover.

These cautious estimates are being driven by several factors, valuation in U.S. stocks

are high, and importantly haven't moderated like many other markets around the world.

Estimates for corporate profitability look pretty optimistic, especially as Morgan Stanley's

Chief U.S. economist, Ellen Zentner, expects U.S. growth to slow sharply in the third quarter.

...