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

Strategist for 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.

It's Friday, August 30th at 2 p.m. in London.

Financial markets are currently focused on two debates.

First, how weak or not is the outlook for global growth. And

second, what, if anything, can Central Banks do about it? On both questions, our view

at Morgan Stanley is cautious. One reason we're advising a defensive asset allocation and

are underweight global stocks.

On growth, our economists have just made another downgrade to their estimates and see global GDP

averaging just 2.7% over the next four quarters, just two-tenths of a percent above

their threshold for a global recession. But I want to focus today on the second question,

how much can Central Banks do to boost markets in the face of that growth slowdown?

And importantly, what are the negative effects intended or not that these actions could have?

September is set to be a month of Central Bank activity.

The market expects the European Central Bank

to reduce interest rates by one-tenth of one percent when they meet on September 12th, and for the Federal

Reserve to reduce rates by one quarter of a percent when they meet a week later on September 18th. Lower

interest rates, which have pushed bond yields down, have been widely cited as a

supportive factor for stock markets, making stocks look cheaper by comparison to richer bonds.

But we are more skeptical.

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