News Brief from AXA Equitable: Highlights from recent notable market news reports
September 2, 2011
One investment adviser, Mark Matson, found in reviewing 10,000 prospective client portfolios recently that 70% of their assets on average were invested in cash and fixed-income securities (“Investors setting themselves up for ‘same disastrous pattern,’” by Andrew Osterland, Sept. 1, 2011, InvestmentNews).
“I suspected they would be heavy in cash, but not to this degree,” Matson, who manages just under $3 billion for individuals, told InvestmentNews. “Investors overweighted equities when they were hot, panicked when they crashed and are still sitting on the sideline.”
Matson’s finding is consistent with trends in Treasury yields, which are near historic lows because of economic uncertainty, but the steepening yield curve – the spread between yields on short and long duration Treasurys – points to some expectations for a U.S. recovery (“Treasurys’ Curve Ball: Yield Spread Hints at Growth Optimism,” by Tania Chen and Cynthia Lin, Aug. 31, 2011, The Wall Street Journal).
“Yields down at these levels still reflect some nervousness, but the curve is much steeper today than anything you got in 2002, 2003, signaling a better economic environment going forward,” Dan Greenhaus of BTIG told the Journal, referring to the spread between 5-year and 30-year yields.
In the same vein, a Bloomberg article noted that “the economy has never contracted with the difference between 10- and 30-year Treasury yields as wide as the current 1.34 percentage points, or 134 basis points, since the so-called long bond was first issued in 1977.” (“Long Bond Shows No Double Dip in Widening Treasury Curve,” by Cordell Eddings, Aug. 29, 2011, Bloomberg).
The flight to quality that has depressed bond yields drove more than $2 trillion of market value out of the shares of companies in the S&P 500 index through the end of August from the July 22 peak (“S&P 500 at Reagan Recession Values After $2.3 Trillion Drop,” by Inyoung Hwang, Aug. 29, 2011, Bloomberg).
“There are truly some terrific values out there in companies, but it’s a question of timing,” John Massey of SunAmerica Asset Management told Bloomberg. “Right now, the market is very short-term sighted.”
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