Welcome to Thoughts on the Market.

I'm Mike Wilson, Chief Investment Officer and Chief US Equity Strategist for Morgan Stanley.

A lot of my colleagues bring you a variety of perspectives.

I'll be talking about the latest trends in the financial marketplace.

It's Monday, June 14th and 1130 AM in New York, so let's get after it.

Last week's much anticipated release of May's consumer price index turned out to be higher

than expected.

However, both nominal and real 10-year treasury yields fell.

While this market reaction may have surprised investors, there are plenty of reasons to

explain it.

First, as noted in our recent research, inflation has been the most discussed topic with clients

for weeks.

Second, treasury inflation protected securities or tips have become very crowded, especially

in the retail community.

Third, the actual pricing of future inflation is already reflecting a bullish outlook, with

most 10-years reaching 10-year highs.

And finally, both corporate and consumer surveys suggest expectations about inflation have

changed, too.

This is important because expectations can lead to behavioral changes that make inflation

more persistent.

While all these measures have moved up sharply, they also appear to have peaked from a

rate of change standpoint with the shorter 10-years of the inflation expectations market

...