CIO Weekly: The Benefits of a Buyer’s Market

The market is acting like a buyer's market despite record equity index highs. This means investors are more discerning, demanding lower valuations and higher yields. Abundant liquidity and high cash yields allow for this patience.

Beneath the surface, many companies are struggling with higher rates. Breadth is poor, with a significant percentage of Russell 2000 and S&P 500 constituents well below their highs. Financing-sensitive businesses and those serving lower-income consumers are feeling the pinch.

We've reduced our equity overweight to target, cutting exposure to small caps and emerging markets. In fixed income, we're seeing increased spread demands for weaker credits, like CCC-rated debt and certain sovereigns. The market is pricing risk more appropriately, favoring companies with strong fundamentals.