This crisis response is ranged not just in financial regulation but as disparate as U.S. reaction against environmental challenges in the Gulf of Mexico to handling in China and Thailand of income disparity angst. One year into earnings recovery from the cyclical bottom and incorporating not just present yields but also future risk premium recovery, we believe unusual value starts to develop below 1050 for the S&P 500 (1050) and the MSCI World index (1060) on a moderate recovery scenario, distinct from seamless recovery that markets earlier appeared pining for and from the much feared double dip. Overall, we re-assert that contrary to the low quality/momentum preferences of the markets in the twelve months thorough April 2010, opportunities in this cycle lie in quality. For us, quality is not a euphemism for size nor defensive nor so-called ”risk-off” tilts but instead is favor for strong balance sheets and products whether from the perspective of company equity or sovereign country risk.
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