Welcome to 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, December 21st at 11.30 a.m. in New York,

so let's get after it.

This morning we woke up to a broad sell-off in equity market futures,

the worst in many months.

Whenever unexpected declines like this happen, people want to know why, so they look for specific reasons to explain it. It's human nature.

In this particular case, the primary culprit seems to center around a new strain of the virus in the UK and subsequent

lockdowns and travel restrictions.

To be sure, this is a reasonable explanation for the sell-off, but in my view it's not the real

driver.

Instead, my view is that markets often don't need a reason to

sell off or rally for that matter. Many times it's just exhaustion of a

trend that is carried too far and in this case it's fair to say that the current

positive trend is likely carried far enough for now.

Therefore, I strongly suggest to sell out this morning is just a good example of one of my favorite

investment truisms, that equity markets bottom on bad news and top on good news.

On that score, the evidence is fairly one-sided. Over the past

eight weeks we've had a parade of good news in the absence of much bad. In that regard the

big news over the weekend may have been the fiscal deal that Congress was

finally able to come to terms on.

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