PNC Wealth Management this past week recommended investors shift some assets more toward corporate bonds and away from equities markets, particularly international. "We're just taking a step up the capitalization ladder, getting a little more safety, getting more income," said Bill Stone, chief investment strategist for PNC Wealth Management. "We took out international because the policy response there hasn't been so hot. It's been slower in the EC, and Japan is an absolute mess."
Stone said the stock market typically leads the way, ahead of a recovery but the economy is worse than expected and government programs have moved slower than anticipated. "I think a lot of stuff we thought would have been up and running by this point has gotten bogged down," he said.
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"These markets are rioting for answers right now. We're going to take a step back. We think we can still get risk-adjusted returns out of the fixed income area," he said.
MFS Investment Management executives visited CNBC Friday, and said they were buyers of select stocks. "Everybody should understand the government is doing everything they can to help stabilize the system. It's not going to be perfect, but ultimately this is the most flexible economy in the world. The markets have discounted a worse case scenario. We don't think there's a great depression, and we think it's time to buy," said Robert Manning, CEO of MFS Investment Management.
But he also said Washington is part of the stock market's problem. "the problems coming out of Washington is they act like they want to destroy capital formation instead of creating it," he said.
David Antonelli, MFS chief investment officer global and non-U.S. investments, said he looks for companies that are well-capitalized and without a lot of debt."You don't get paid to take high risk right now because the low risk companies are cheap," he said. Some of those opportunities are in health care he said, and he specifically pointed to defense company Lockheed as a cheap stock. "You're buying it for eight times free cash flow," he said.
From 'Fast Money':
Antonelli said the market is nearing a point where investors will probably start to value companies by the amount of sales they generate rather than earnings. He also said the biggest reward looking out over the next several years will probably be in distressed debt. "that's where the mega returns will come from," he said.
Fear of Financials
The meltdown in financial company stocks in the past week comes on the heels of the government's deal to up its stake in Citigroup, a deal that pushed Citi preferred shareholders into common.
Late Friday, the U.K. government struck a deal with its Lloyds Banking Group in which the British government would insure more than $350 billion in assets and increase its stake in the bank to as much as 75 percent, according to Dow Jones.
From 'Mad Money':
Stanley said the affect of the Citi deal is still rippling through the U.S. market and investors are worried it's a blue print for other banks. "The problem for the stock market is that you can earn equity-like returns in some of the debt products. In some ways, the policy response is kind of nudging things that way, the latest round of policy response has really hinted at a bright red line between the creditors and the equity guy," said Stanley.
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