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

Strategy from 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, June 28th at 2 p.m. in London. The G20 meets this

weekend and all eyes will be on whether the US and China will use it to make progress on trade.

Three scenarios are possible.

The two sides make major progress on key sticking points and a comprehensive deal becomes

more likely.

The two sides can make little or no progress, leading to additional U.S. tariffs.

And then there's a third scenario. Just enough progress is made to lead to a pause in any

new trade actions as both sides return to the negotiating table.

Most investors, ourselves included, would see major progress on trade as a clear positive

for markets, while a breakdown of talks would be a clear negative.

But where we differ is how we think things look under that middle pausing scenario.

While markets might initially cheer the delay in any new US tariffs on Chinese goods,

we think the resulting bounce would be short-lived.

Why are we more skeptical of a scenario where the two sides agree on a pause in further actions?

We have four reasons.

First, while the delay of any new tariffs is a good thing,

it could also mean that the broader trade dispute

drags on for longer as a potential source of pressure and urgency is removed.

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