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

perspectives, I'll be talking about the latest trends in the financial marketplace. It's

Monday October 14th at 9 a.m. Easter, so let's get after. Last week all eyes

are on the ongoing trade negotiations as Chinese diplomats visited for high-level trade talks.

On Friday we learned that there was a verbal agreement on several key items that have been under

negotiation.

Without going into too much detail, the bottom line is that the US agreed to not go forward with

tariff increases scheduled for this week in exchange for more US agricultural purchases by China

and some modest agreements around currency, intellectual property, and better U.S. access to Chinese

financial markets. In short, this was more of a trade detente than a comprehensive deal.

In fact, the U.S. administration called it phase one of what could be two to three phases over the next year,

leaving hope for more to come.

While this is a step in the right direction, we think it's far from enough to reverse

what has been quite a slowdown in the global economy over the past year.

First of all, much of the slowdown

has had little to do with trade tensions.

Instead, the main culprit, in my view,

has been the corporate profit cycle rolling over.

Over a year ago, we made a call that global profit cycle was

peaking and that it would likely lead to a meaningful earnings recession in

2019 both globally and in the United States. In fact our view at the time was that the profit slowdown

...