Morgan Stanley
  • Thoughts on the Market
  • Jul 9, 2020

Pressure Testing the “Overoptimistic Markets” Argument

With Andrew Sheets


[MUSIC PLAYING] My life and the way that I thought about life changed forever the day my kids were born. And the things that I am passionate about and the things that I'm interested in now, I never would have even given a second thought to prior.


Asher was born three months premature, along with his twin brother. And Asher's got cerebral palsy. We were told very early on, about seven days in, that chances were that he wasn't going to walk, he wasn't going to talk, he probably wouldn't see, and what did we want to do. I literally did not go to work for three months. I was a sales manager in Fort Lauderdale. And the regional director in the firm basically told me not to come back to work until my kids were home.

So that's another thing that is very important to me relative to why I'm at Morgan Stanley for 22 years. We had a doctor that told us, take the diagnosis to heart, but the prognosis is up to you. So do everything you can for your child, so that he can be as successful as he possibly can be. So we've tried everything.


This therapeutic riding is just one of many things that we've done to try and help Asher throughout his life. When I was first introduced to this Asher was four years old, and he had had multiple surgeries. And the thought of putting him on top of a huge animal like that was pretty scary, and I was not necessarily for it. But too many people talked me into it.

And it's really been one of the best things that's ever happened. It's given him a tremendous sense of belonging. It's given him self-confidence. It's built his physical strength and posture. And really made him feel part of a community.

I hope I'm confident to grow. Yes, I'm competitive. Like, at all sports. Hockey. You have to be competitive. Any kind of sport, competitive.

You're competitive in Xbox with your brother too, right?


One thing that has changed dramatically for me prior to Asher just being born and prior to our involvement in equine-assisted therapies-- if I were to see a parent walking with a child in a wheelchair, never in a million years would I have thought to walk up to that child and try and put a smile on their face. Other employees, other friends-- I've brought them down to the barn, and when they go there and they see exactly what this does for people and what these people are like and what these kids are like, I think it changes them as well.

The Morgan Stanley Foundation matches our time. So my time on the board is matched by the Morgan Stanley Foundation in dollars. So for the last two years, we've got very generous donations from the foundation matching my time spent on the board.

First place.

How do you feel when you win those ribbons?

I feel happy. I feel like I've worked hard for that.


What happens when you fall off a horse? What do you do?

Get right back on.

There you go.


The sharp rebound in stock and corporate bond markets has made some question if markets are a bit too upbeat about a speedy recovery. There’s just one problem with this view.

Each week, Chief Cross-Asset Strategist Andrew Sheets, or a member of his team, offers perspective on the forces shaping the markets as well as insights on investment opportunities and risk across global asset classes.

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Current Episode Transcript

Welcome to Thoughts of the Market. I'm Andrew Sheets, Chief Cross Asset Strategist for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about trends across the global investment landscape and how we put those ideas together. It's Friday, June 5th, at 2pm in London.

This podcast was launched so that we could address the questions that we think are on the minds of investors. And so there seems to be an obvious question we should address that's been coming up a lot this week: how on earth can markets be climbing, given what's going on at the moment? From the current public health crisis to record unemployment to large protests against systemic racism that have been happening across the U.S.

This is a hard question to answer because of what markets are and are not. They're impacted by psychology, but they themselves have no feelings. They're governed by rules and regulators, but have no leader. They're used as shorthand for the state and health of the economy, but frequently diverge from it. Still, we think there are ways to think about these issues.

Regarding the economy and the public health crisis, our view has been that markets usually react more to the rate of change of something than the level. Our economists continue to believe that April represented the low for global economic activity and that data will improve going forward. Global Covid-19 numbers have also been improving and the success of certain countries shows that defeating the virus is within our capacity. As I discussed with my colleague Matthew Harrison recently on this podcast, the market's next focus may turn to progress on a vaccine, where important initial data could arrive this month.

Note, too, that we're seeing an unprecedented amount of support for governments and central banks to address the economic and public health crisis. The U.S. is on course to run its largest deficit since the Second World War. And we think most investors hope this support is expanded further. The Federal Reserve is buying more assets relative to the size of the economy than QE1, 2, and 3 combined.

As to how markets could climb in the face of scenes from my home country, there are many words that come to mind, none of which seem adequate. I could say that the random walk of markets often ignores current events and for example, they've been ignoring the deterioration of U.S. and China trade over the last month. I could say that what maximizes profits and what maximizes progress are not always the same because if it were, progress would be much easier. I could say that the supposed disconnect is actually quite easy to explain, if one's view is that what's happening today will lead to better future outcomes. Each of these factors drive, in part, how we think about markets and current events.

But I do wonder, however, if these current events could increase the focus on ESG investing. ESG is based on the idea that companies with quantifiably better environmental, social, and governance policies not only reflect values for an investor, but can deliver long run value to an investor. It's a segment of investing that's been seeing significant growth in recent years as more investors have come to see it as a source of alpha and more investors have wanted to put their money in enterprises that align with their values.

When thinking about ESG investing, our process at Morgan Stanley has tried to remain rooted around what can be quantified. For example, work by my colleagues Jessica Alsford, Ellen Zentner, and Borse Lerner, among others, has shown that companies with more gender diversity on their boards deliver more investor alpha over time. For company performance, it was a way to evaluate companies on what they did rather than on what they said. 

Thanks for listening. If you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple Podcasts App. It helps more people find the show. 

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