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 a variety

of perspectives, I'll be talking about the latest trends in the financial marketplace. It's Monday, November 2nd at 11.30 a.m. in New York. So let's get after it.

Two weeks ago we suggested the U.S. equity market was due for its second 10% correction in as many months.

We felt like investors were a bit too complacent on the uncertainty surrounding the election

outcome, unlikely passage of a fiscal stimulus before the election, and the inevitable second wave of COVID-19.

Fast forward to last Friday and the S&P 500 has fallen 9%,

while the Nasdac and Russell 2000 fell 10% and 7% respectively.

Does that mean the correction is over?

The short answer is that the worst of the correction is over in our view,

but we still think the next month is likely to remain volatile and uncertain as we navigate what is shaping up to be a much closer

election than expected just a few short weeks ago. Furthermore, we still face the

risk of a further lockdown as the second wave of the virus runs its course.

The primary thrust of our call was based on the view that valuations were too high

given these risks. With interest rates rising rather than falling as they typically

due in equity markets sell off, the price to earnings ratio had fallen by approximately 10%

at Friday's close.

The bottom line for us is that the correction we expected is now mostly finished and adding

to equities on further bouts of weakness this week is recommended.

We've also arrived at the event that many people have been focused on for months, if not years,

the 2020 U.S. election.

While almost all the national polls suggest a Joe Biden victory, the swing states that will determine the outcome in the electoral college are very much a toss-up.

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