Monthly Archives: July 2011

Second Quarter 2011: Economic Outlook-A Sense of Déjà Vu

Second Quarter 2011: Economic Outlook
A Sense of Déjà Vu
By: James Solloway, CFA, Managing Director, Senior Portfolio Manager, SEI
(summary)

If you think you’ve seen this movie before, you’re right. Some of the major issues troubling investors in recent months – Greek debt woes, a general slowing of global economic growth, and a deepening fiscal crisis in Washington – are the same ones that loomed large this time last year. The market reaction to these problems, moreover, has been strikingly similar: Investors have reduced their exposure to equities and other assets perceived as risky, and fled to traditional safe havens, including low-yielding U.S. Treasury securities and German bunds. Equities and commodities have endured a stiff correction, Treasury bond yields fell below 3% before rebounding at quarter’s end and the dollar has bounced off its lows.
The question on every investor’s mind: Will this year’s episode of market weakness and uncertainty end as positively as last year’s, with growth reaccelerating and equity markets posting strong recoveries? We think the answer is “yes” and view declines as buying opportunities. Consequently, we are maintaining our bullish, pro-cyclical position that tilts toward equities and away from fixed-income securities. We continue to emphasize high-yield bonds over investment-grade debt, with an eye toward increasing bullish leanings if equity valuations become more compelling.
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Second Quarter 2011 Market Overview & Debt Ceiling Commentary

Please view the link for the 4 minute video presentation regarding  Second Quarter 2011 Market Overview:

Also see the SEI commentary re U.S. Debt Ceiling: The Clock is Ticking By: Sean P. Simko Managing Director,

Conclusion: SEI Fixed Income Portfolio ManagementSEI’s Investment Strategies Group and SEI Fixed Income Portfolio Management share the opinion that failure to raise the debt ceiling prior to the deadline would likely have a significant, negative impact on the global economy, raising the potential of sliding back into recession.

Due to the severe consequences of late or no action by Congress, we believe an agreement will be reached by the prescribed deadline. While it would not be prudent to discount the possibility of default, we view the potential for such a scenario as being low. It is clearly in the best interests of the U.S. government to take all necessary measures to avoid missed payments or default due to the inability to raise the debt ceiling. Based on our current outlook, SEI’s portfolio managers do not view the debt ceiling debate as a reason to alter our portfolio positioning. We, along with the rest of the world, will watch and wait for Congress to do the right thing.

Full commentary and disclosures at http://www.compasssecurities.com/debt/ceiling.pdf