Portfolio managers are hungry for bonds, apparently. Yesterday’s sell-off in equity markets attributed, to among other things, a desire to rebalance towards bonds after stocks have handily outperformed in the quarter according to traders citing a Goldman Sachs report. GS estimates $7.7 billion worth of equities were for sale (maybe as high as $12 billion) with the proceeds shifting to bonds. Or maybe it was the Ukrainian helicopter that was shot down in the eastern part of the country by rebels. Or the Syrians coming over the Iraqi border. Or – Charles Plosser in a speech saying the Fed should raise rates next quarter! Or – just taking a little off the table – especially in the energy space. We’ll see what the follow-through is today.
Cash is King. In a recent report from Factset, after reviewing all the Q1 data for S&P 500 companies they note that cash stood at $1.34 trillion or up 6.6% year over year. However, because Verizon purchased Verizon Wireless in the quarter – cash fell 4.7% quarter to quarter, the first quarterly drop since Q2 2012. Two other items of note from the report. Capital expenditures rose 6.2% after a miserable 1.5% over the past four quarters. Free cash flow rose 9% and distributions to shareholders (dividends and buybacks) rose 46%. A potential caution – debt issuance rose for the 15th straight quarter – running at the second-highest quarterly level. Most cash is held by IT companies, and Microsoft is right at the top of the list of all companies with $88.4 billion in cash and investments. Apple dropped to No. 5 with $41.35 billion.
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