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

Strategy 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

different ideas together. It's Friday, April 24th at 2 p.m. in London.

In the midst of the current public health crisis, there's a temptation to assume that investors are facing

something unique and that historical patterns no longer apply. But we

disagree with this notion. As unusual, uncertain, and unsettling as the

current environment is, key elements of the business cycle we think remain intact.

We believe strongly that markets lead the economy, not the other way around,

and that history suggests that recently weak economic data can actually

support higher 12-month returns for credit and lower levels of market

volatility. When thinking about the business cycle we find a couple of notions

helpful.

First, that the economy is cyclical.

It moves in waves, as caution and underspending usually give way to optimism and excessive spending.

That excess then leads to recessions and those recessions

reset the economic cycle starting the whole process again. It all sounds simple

enough but with thousands of possible economic indicators, trying to model that process can easily become noisy and overwhelming.

At Morgan Stanley, our cycle indicator is based on 10 large key metrics for the U.S. economy,

which have tended to be leading. This simplification of the economic

cycle in aggregate can be broken down into one of four possible stages. This data can be either

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