Welcome to the thoughts on the market. I'm Mike Wilson, Chief Investment

Officer and Chief U.S. Equity Strategist for Morgan Stanley. Along with my

colleagues bringing you a variety of perspectives, I'll be talking about the

latest trends in the financial

marketplace it's Monday July 8th at 9 a.m. Eastern so let's get after it

markets are discounting machines yet the remains of preoccupation with

trying to explain today's moves with today's news.

The reality is that by the time the news hits the tape,

financial markets have likely already priced it, or at least a large majority of it.

Exaggerating this trend is the fact that central bankers have created a world in which they

telegraph any policy move months in advance in an effort to not surprise the markets.

At the stock level we have fair disclosure, which requires companies to be an open book with regard to how they are seeing the future.

This transparency has led to extremely narrow earnings estimates on Wall Street, which means less surprise and therefore volatility.

Such dampening of volatility can be helpful for asset valuations, but it can also be dangerous

that the markets end up being surprised with bad news.

We think the next three months could offer several negative

surprises that are not being discounted thanks to a very transparent Federal

Reserve and company guidance on earnings. First, it's basically a foregone

conclusion that the Federal will be cutting interest rates at the end of this month.

The only question is whether they cut a quarter or half a percentage point.

Over the past decade, investors have been rewarded by anticipating such cuts, because they've tended

to lead to better returns both

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