Marvin Loh – Managing Director, BNY Mellon Capital Markets, LLC
In what seems like an apropos setting for the 25th anniversary of Black Monday, stocks are presently down by their widest margins in almost four months. The expected tumultuous 3Q:12 earnings season is proving to be just that, with less than 60% of companies beating expectations and the S&P earnings looking to contract for the first time in over three years. We have observed a preference for defensive sectors since QE3 was announced, along with falling commodity prices. This is indicative of investor skepticism over the effectiveness of the latest Fed buying program to generate economic growth. Those assets that are directly impacted, or not far removed from the QE machine, have nevertheless rallied. While the growing scarcity of MBS is obvious, we think that investors have moved to diversify from this shrinking market into agency securities and investment grade corporates, producing excess returns for those asset classes over the past month. Read the full commentary now.
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