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

Strategy at Morgan Stanley. Along with my colleagues bring you a variety of

perspectives, I'll be discussing trends across the global

investment landscape and how we put those ideas together.

It's Thursday, May 21st, at 2 p.m. in London.

At the moment, there's understandably a great deal of focus on what's happening in the here and now. But I wanted to talk today about a growing debate over the longer run picture.

As one looks past this year and into 2021 and 2022, current market pricing implies a very weak recovery and an extended period of

unusually low levels of inflation. But is that right? Our economists at

Morgan Stanley think that that's too pessimistic and that the odds of a higher

inflation outcome in the coming

years are larger than the market expects.

When we say higher inflation, I really want to stress that we envision a scenario where inflation

rises to say two or three percent in the United States rather than anything like the where inflation is expecting US inflation to average just 1.1% over the next decade and stocks that usually benefit

from an uptick in inflation have been significant lagers. But how could inflation rise, given that the depths of the

current recession mean that there's an

acute shortage of demand for goods and services which tends to push prices down, not up?

Well, we think it could be a few things.

The first is that we think US and global growth

will recover slowly this year but more so in the years that follow. Our

economists expect US and global growth to return to pre-Korona virus levels by the

end of next year, a forecast that we think still assumes a very gradual pace of normalization and that is aided by an unprecedented level of government and Central Bank support.

Moreover, life after social distancing could see what I'd call

...