Market & Economic Commentary

The Russell Investments 2010 Global Survey on Alternative Investing found that institutional investors, on average, intend to boost their weightings in alternative investments from 14% to 19% over the next two to three years, according to Russell Investments. Use of hedge funds is expected to rise from 4.2% to 5.7% in 2012, well below the 7-8% target in previous surveys. Surprisingly, 84% of those surveyed plan to upgrade their governance and risk management approach. Over one-third said they are increasing proprietary research in one or more of the following areas: asset class, asset allocation and specialized investments.

There are 10,112 analyst ratings on the companies in the S&P 500, according to Bespoke Investment Group. There are 5,331 buy ratings, 536 sell ratings, and 4,245 hold ratings. The Technology and Health Care sectors have the highest percentage of buy ratings at 58.7% and 56.0%, respectively. The Utilities and Financials sectors have the lowest percentage of buy ratings at 41.9% and 43.8%, respectively.

The Q2'10 edition of the Investment Manager Outlook (released June 23rd), a survey of investment managers conducted by Russell Investment Group, found that 47% of those money managers polled believe U.S. equities are undervalued, up from 28% last quarter. Managers are most bullish on the following asset classes: U.S. Large-Cap Growth (63%); Emerging Market Equities (61%), U.S. Large-Cap Value (55%), U.S. Mid-Cap Growth (50%); and U.S. Mid-Cap Value (45%). The asset classes managers are least bullish on are Treasuries (12%) and Cash (16%). The sectors managers are most bullish on are Technology (69%), Health Care (60%) and Consumer Discretionary (47%).

A report released by the Office of Thrift Supervision and Comptroller of the Currency revealed that over 50% of all homeowners with modified mortgages fell at least two months behind in their payments a year after the adjustment was made, according to CNNMoney.com. The potential silver lining was that only 40.7% of loans modified in Q2’09 were delinquent after nine months, compared to 51.6% of those adjusted in Q4’08. The basic goal of mortgage modifications is to reduce borrowers’ monthly payments to no more than 31% of their pre-tax income.

S&P 500 stock buybacks totaled $55.3 billion in Q1’10, up 79.5% from the $30.8 billion executed in Q1’09, but 67.8% lower than the $172.0 billion (peak) repurchased in Q3’07, according to Standard & Poor’s. Buybacks have risen in each of the past three quarters. Information Technology accounted for 29.3% of all buybacks, followed by Consumer Staples at 19.3%. Telecommunications Services and Utilities were the only sectors to reduce their buyback expenditures. S&P Indices sees buyback growth outpacing dividends throughout 2010, according to Howard Silverblatt, Senior Index Analyst at S&P Indices.