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

Strategist for Morgan Stanley. Along with my colleagues bringing 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 17th at 2 p.m. in London.

At Morgan Stanley, we've been constructive about the prospects for the global economic recovery

and what this means for

financial markets. As we think out over the next 12 months we continue to hold that

view believing that the global economy will continue to improve and that markets are

not yet priced for this to occur.

But with that in mind, I wanted to focus on a specific caveat to this story.

While myself and my colleagues continue to believe strongly in this 12-month recovery,

and while July contained several potentially positive

market events I'm really struggling to see any good news over the months of

August and September. In the short term we need to brace ourselves for a more

challenging investment environment.

The contrast between this month and the two that follow looks stark.

July is seeing companies report their second quarter earnings, which provides a helpful clarity on just how

difficult conditions are it should see the US Congress pass an additional round

of financial support and it should also see important progress for the European

Recovery Fund something that we've thought is an important shift

towards more federalism in Europe's regional economic architecture.

...