Risk appetite is on the wane with investors eschewing blue-chip income options, such as General Motors, as worries mount that prospective earnings (and cash-flows) will prove insufficient to support existing pay-rates; a scenario that is also playing out in the UK equity market. Meanwhile, financial companies are trading at their lowest valuation ever relative to the broader market and major disparities in earnings multiples are now apparent across several other sectors in the US – a sign that existing valuations are vulnerable, with all the risks weighted to the downside.
