Welcome to Thoughts on the Market.

I'm Mike Wilson, Chief Investment Officer and Chief U.S. 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 Tuesday, July 13th at 11 a.m. in New York, so let's get after it.

In many ways, this year's investment landscape feels very similar to 2018.

Global money supply growth is decelerating and asset markets are experiencing a rolling

correction with the most speculative assets down as much as 50% from their highs.

While most people only look at the price of the major indices to gauge the health of

the equity market, we focus on the internals.

From that standpoint, the breakdown in speculative assets and strong rotation towards higher quality

ones is the market's way of hunkering down.

Furthermore, the breadth of the market has completely broken down.

In fact, we've never witnessed breadth this week with major indices at all-time highs.

What this means is that the foundation of the market is fragile.

It needs to strengthen or else the major averages are vulnerable to a material correction.

In 2018, the breadth was also weak and unable to strengthen.

The result was a 20% correction in the S&P 500 during the fourth quarter.

In today's situation, we see several specific reasons for the bad breadth that need to be

reconciled or else the broader market will likely stumble.

First, there is a potential payback on demand from last year's surge in spending from

extraordinary fiscal stimulus.

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