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

different ideas together.

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

On Wednesday, July 31st, the Federal Reserve reduced its target rate by 25 basis points.

It was the first rate cut for the Fed since December 2008,

and the first start to rate reductions since 2007.

Markets had been rising all year on the hope that Central Banks would ease policy by lowering

interest rates.

But when the rate cut finally came this week, something different happened.

Stocks fell.

The story of what could be driving this is important.

The dynamic between stock markets and Central Bank expectations wasn't the main reason

we downgraded global equities to underweight in early July, but they were a reason.

In addition to our worries about valuation, growth, and trade

uncertainty, we've had two specific concerns regarding central banks.

First, the expectations towards them from investors were very high, making it

by definition harder for them to be exceeded.

And second, in contrast to many others in the market, we are firm believers that the power of

Central Banks is more limited than appreciated.

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