Morgan Stanley Identifies 3 Factors Driving Expected Equity Returns

1. US Dollar Appreciation
2. Credit Spread Widening
3. Yield Curve Slope Volatility

The bank is saying in a Monday morning note that "for each 20bps in credit spreads, the S&P 500 is expected to decline almost 1% while a nearly 7% increase in the US Dollar Index is required to produce a 1% decline"

Morgan also notes that the equity microstructure since the 2008 crisis has returned to its "normal" behavior meaning growth has trumped value, high quality bonds beat junk bonds, and low beat outperformed high beta.