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

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

Monday, September 16th at 9 a.m. Eastern, so let's get after it. Last week

equity markets around the world are up about 1 to 2 percent which based on

historical averages is a very strong performance.

The bond market on the other hand had one of its worst weeks ever, with 10-year Treasury yields

rising almost 50 basis points.

And this follows one of the best months ever for Treasury

bonds in August. Such volatility in the most important discount rate in the world

for asset valuations typically leads to higher volatility in other markets including equities.

Meanwhile if you looked under the hood of last week's equity market performance it was

anything but calm. More specifically we saw one of the biggest reversals in

price momentum in history. A price momentum

strategy is one that buys the stocks with the best price momentum and

sells the stocks with the worst price momentum over the past six to 12 months.

With the advent of trading algorithms and machines that can easily measure and follow such moves,

the growth in such strategies has exploded over the past 10 years.

This means certain positions have become very crowded,

while others have become almost abandoned.

I've talked in the past about the extreme bifurcation we've observed in valuations between

growth and value stocks over the past few years.

...