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, May 11th at 1030 a.m. in New York, so let's get after it. While hard to

believe it's only been 12 weeks since equity markets were at an all-time high and

unemployment in the United States was at a 50-year low.

Many other metrics were also at extremes, signaling good times for the economy,

consumers, and businesses, leaving most sentiment surveys

very optimistic.

Fast forward to today, and the situation couldn't be more the reverse, starting with the

U.S. unemployment rate at an 80 year high.

As a result, both consumer and business confidence measures

have fallen sharply, while most stocks are still 20 to 30 percent

below February levels, even after one of the largest rallies on record.

A month ago our conversations with investors centered on how much downside was left in this bare market

and how low the equity markets would trade in the inevitable retest of the March lows.

Today those conversations are quite different as most investors are no longer of the view that the

equity market will retest those lows but rather are asking how high it really can trade given all of the

uncertainties we face in the recovery. In short it's a different kind of bearishness

one that accepts the extraordinary policy response as having done its job to stop the decline, but skeptical

it can lead to a sustainable recovery.

Our view is that we will see a V-shaped recovery for two reasons, the record statements

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