Here are the notes from Standard & Poor's Investment Policy Committee meeting, held on Wednesdays.
Equities have performed well recently, as declining oil prices and a more benign inflation outlook are increasing investor conviction that an end to Fed tightening is emerging, in our opinion. However, with the economy slowing amidst a significant weakening in the housing market, we believe upside through yearend will be limited, as 2007 EPS visibility remains murky.
Since the market bottomed on June 13, large-cap stocks have outperformed, with the S&P 500 index up 6.1%, vs. only 4.3% and 2.9% advances for the S&P Small Cap 600 index and the S&P Mid Cap 400 index, respectively. We believe this quality rotation will continue.