Morgan Stanley noted the following on...>

MARKET TALK: Morgan Stanley noted the following on Wednesday: "the idea that

valuations already reflect a 'V shaped' recovery is a frequent refrain in the

market, and a risk to our constructive 12-month outlook. During recessions,

earnings and default rates both see large, temporary deviations from trend. Both

can distort the true valuations picture, a reason why we think that 'through the

cycle' valuations are especially useful at present. Defensive assets are (much)

richer versus history than their more cyclical peers, the opposite of what one

would expect if there was economic optimism. This is true across asset classes,

whether it's the BBB-A credit basis, small versus large-cap equities or the

shape of the yield curve. 'Valuation' does not top our list of concerns. And

many of our preferred relative themes all have attractive relative valuation: a

weaker USD, higher yields, steeper curves, lower volatility, BBB-A spread

compression, EU value equities and US smaller and more cyclical stocks."