Welcome to Thoughts in 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, June 21st at 11.30 a.m. in New York, so let's get after it.

Last week's Fed meeting has brought more uncertainty to markets, but one thing is becoming

more obvious.

We're on the other side of the mountain with respect to monetary accommodation for this

cycle.

Furthermore, this is a classic mid-cycle transition behavior, so investors really shouldn't

be too surprised that the Fed would try to begin the slow process of tightening.

After all, the U.S. economy is booming, and expected to grow close to 10% this year in

nominal terms.

Meanwhile, no matter what one's view is on inflation longer term, prices are up significantly,

and likely higher than what the Fed was expecting six months ago.

In other words, the facts and data have changed, therefore, so should Fed policy.

This looks very similar to May 2013 when former Fed Chair Ben Bernanke surprised markets

with his mention of tapering for the first time in that cycle.

Just like then, we think real rates are likely to move higher from here, and that will

present a headwind for all risk markets, including equities.

The economic data have been so strong, it would be naive to think the Fed wasn't moving

...