Welcome to Thoughts on the Market. I'm Mike Wilson, Chief Investment Officer and Chief

U.S. Equity Strategies 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, June 8th at 9 a.m. in New York, so let's get after it.

Since late March, I've taken an optimistic view of equity markets for the following reasons. In

Great March, I've taken an optimistic view of equity markets for the following reasons. First, fair markets end rather than begin with recessions.

Second, the health crisis that triggered this recession has brought unprecedented monetary and fiscal stimulus that would otherwise have been impossible.

Three, the political pressures behind the reopening of the U.S. economy are likely to make it faster and more durable, even if a second wave of the virus emerges.

Four, sentiment and positioning have remained remarkably bearish considering the size and

persistence of the equity rally to date.

And finally, index prices, the equity risk

premium, market breath, and early cycle leadership are all following the same

pattern we witness at the 2009 bottom during the great financial crisis.

In short, our Recession Playbook is working.

Having said that, a few signals have been missing

that would support a continued bullish outlook for equities.

Specifically, the US dollar has remained strong and the

10-year Treasury yields remain depressed. While one could argue that a strong US

dollar benefits US equity markets through flows and lower interest rates support valuations, our contention is that both are bad signs for the economic recovery.

Therefore, we were glad to see both a weaker dollar and higher back-end rates last week even before the stronger jobs data were released on Friday morning.

In fact, both have moved above some key resistance levels left over from April.

This combination provides a missing signal for two critical macro markets

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