A new report out this week by Morgan Stanley analyst Andrew Sheets focuses on where the U.S. finds itself in the current market cycle. Although the general data indicates that the U.S. economy is in the middle of the expansion phase, Sheets points out that global markets currently appear to be out of synch in ways they haven’t been in the past.

Regional Disparity

Morgan Stanley uses its “Cycle Indicator” to determine which stage of a market cycle a particular economy is in at any given time. The Cycle Indicator incorporates the macro environment, credit swings and corporate aggression to score the economy and determine if it is in downturn phase, repair phase, recovery phase or expansion phase.

The U.S. economy currently appears to be in mid-expansion phase.

However, the Cycle Indicator also shows that Europe remains in late recovery stage.

Japan, on the other hand, appears to be teetering on the brink of downturn phase after a long period of lackluster expansion.

Sub-Components

In addition to the regional differences, Sheets pointed out…

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