Featured Essay
The Pause That Distresses
July 2011
The past six weeks have presented a difficult investment environment. Stocks took it on the chin in the early part of June with the S&P 500 dropping by roughly 5.5% only to rally back to modest losses by month’s end. Capital continues to flow into Treasuries despite the talk of a technical default on the potential for a debt ceiling impasse. Commodity oriented stocks (mining, materials, energy, oil service, agriculture) were particularly hard hit by fears of slowing economic growth at home and abroad. The banking sector continued its decline as regulatory uncertainty and the question of the validity of real book values caused investors to flee. First quarter earnings reports, particularly for large multi-national companies, continued to show positive results in the first quarter. Once the earnings season was finished, five major concerns gripped investors causing a “risk off” mentality. We’ll discuss each of these concerns and their implications for our managers.