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

Strategist 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, May 29th at 2 PM in London.

From the size of the economic decline to the scale of the policy response, there has been a significant amount of focus on just how unusual extreme and unprecedented current conditions are.

The US has seen job losses that are literally off the charts and what seems like the closest

economic parallel the pandemic of 1918 was over 100 years ago but for investors

I'd caution against leaning too heavily into the idea that what we're seeing is something

without a precedent or an investment playbook. While unique in many ways, in others

this cycle has a surprising number of very usual characteristics.

Let's start with the conditions that persisted before the recession started.

It's often the case that periods before the start of a recession and a bare market,

periods that we'd refer to as late cycle,

share a number of common characteristics.

As the economy overheats, unemployment falls to extremely low levels.

Inflation tends to rise above trend and borrowing jumps. The Fed has often raised rates at some

point in the previous 18 months to address these issues. Investor confidence and

valuations are usually quite high given the apparent economic strength in a late cycle environment

and the bond market sensing trouble often inverts the yield curve.

All of those things were true over the second half of 2019 and at the start of 2020. Indeed, as you've heard

myself and my colleague Michael Wilson talk about quite a bit on this program over the last

...