SOLVED
I discover that replies sent/received from any account on my computer or in the cloud were being affected. Sometimes the "reply arrow" appeared in the message, other times it did not. This happened in Apple Mail and Outlook, even on different computers, Mac or PC. That ruled out a bug or defective preference file.
What I discovered is that my ANTI-VIRUS program on my MacBook Pro was set to "mark mail headers". This for some reason affected the "reply arrow" in the message. I also noticed a similar behavior when I accidentally allowed my companies Exchange Server to mark incoming emails. Not only did this interfere with the "reply arrow" but it also corrupted digitally signed mail.
The point is this. If you have a program or process that modifies incoming email, it may affect how it's displayed, duh. I have Avast for Mac. So I turned off "Mark mail headers" and that solved the problem for me. Other anti-virus programs may or may not have that option.
Remember, once a mail is received on your computer, if its changed, it will be re-synced back into the cloud at some point and back down to your other computers. So even iCloud will be affected. This explains how it affected my mail on the desktop and in the cloud.