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

Strategy from 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 different ideas together.

We're recording this from our London offices on Thursday, June 6th at 5 PM Greenwich, meantime.

A lot of financial market commentary is focused on the short-term market

outlook where at the moment there's plenty of debate with the negatives of increased

trade tensions squaring off against the positives of a potentially more dovish

Federal Reserve and lower stock prices from a month ago.

But above all that near-term noise, there's something else going on.

Many of the long-term signals that we and many asset allocators follow show troubling signs. These signals by their very nature are

slow moving and are unlikely to quickly reverse. They are a reason we think there is

a high bar to becoming strategically more positive on the market here,

whatever one thinks about the near-term tactics of recent Fed commentary.

What are those signs?

Well, with only a little bit of jest,

the market is currently failing a number of tried and tested rules of risk

taking, borne out over the last 40 or 50 years.

For example, if there was one rule of asset allocation, I'd venture it might be don't buy

when the market is near a cycle peak in valuations.

If there were two rules, don't buy when the markets on peak valuations with peak margins.

If there were three, don't buy on peak valuations and peak earnings when earnings growth is slowing sharply.

All those things are true, unfortunately, at least for U.S. assets.

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