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

different ideas together.

It's Friday, August 9th at 2 p.m. in London.

Global stock markets have been weaker recently due to a variety of factors.

Trade tensions between the US and China have intensified,

corporate earnings point to a rapid deceleration and profit growth,

and markets often struggle in August and September for a variety of reasons.

But the driver of weakness I want to focus on today relates to Central Banks,

not on the actions of these institutions per se, but on what is expected of them.

July showed the risks to markets from lofty expectations of Central Bank action.

We may be setting up, unfortunately, for the same again.

But first, let's back up a little.

On July 31st, the U.S. Federal Reserve reduced its target interest rate by a quarter of a percent

and announced they would hold more bonds on its balance sheet than previously indicated.

It did this even though unemployment was historically low.

Equity market valuations were historically high.

And U.S. core consumer price inflation was above 2%.

If one had been stranded on an island and heard that news, they'd be forgiven in thinking that it was going to be positive for stocks.

It wasn't. Global stocks fell on the day of the Fed's announcement and then for three straight days after.

Some of that move can be tied to increased U.S. China trade tension,

...