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"Take a Deep Breath"

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Mr. Buchanan also sees several areas of opportunity stemming from the market turmoil. "We have always looked at the contrast between fundamentals and valuations," Mr. Buchanan said. "Looking at those dynamics right now, we see opportunity in spread sectors. Free cash flow generation is strong, leverage is low, interest rate coverage is high, and the fear of defaults is way overblown. Even factoring in the stress in the energy space, we still believe defaults are going to remain abnormally low for at least the next year or two. Energy companies definitely have the financial flexibility and wherewithal to navigate through a period of depressed oil prices."

"So we look at the fundamentals, then contrast with valuations in the high yield market of 7.5 to 8%. It's difficult to time the bottom and we don't agonize over that, but if you wait for the day things turn, it will be very difficult to buy paper anywhere close to where you could have picked up paper Monday. There's a real opportunity we are reflecting in our portfolio strategies."

By contrast, the U.S. small cap space "has been getting a little bit out of joint over the past several years," according to Francis Gannon, Co-CIO of Royce & Associates.

"That was most noticeable in the first half of this year, with the performance of non-earning companies," Mr. Gannon said. "That's where the majority of the market's outperformance has been coming from. A third of the Russell 2000 is actually comprised of non-earning companies, the highest level it's ever been in non-recessionary periods. Concentration is towards growth. You see it in the outperformance of the growth industries this year versus the value indexes."

"This most recent correction seems normal from our perspective. Small cap markets have corrections periodically. In fact we had a 13% correction from July last year to the middle of October. The triggers might be different this time, but it allows us to be more selective in our portfolios in terms of stocks and price, which we think is really important in today's world."

"The corrections we've seen over the past several weeks, just to show how it's been going on for a period of time now: if you equal weight the Russell 2000, the average stock is down 27% from its 52-week high. So it's been quite painful for small cap stocks for a period of time now."

Brandywine Global believes the keys for stabilization are for the Fed to delay hiking interest rates – previously expected in September – and China must reflate its domestic economy. "Multiple factors converged to drive the correction, but it all boils down to global deflationary forces weighing on U.S. corporate pricing power enough to affect future profitability," said Portfolio Manager Jack McIntyre. "These wild swings may have been exacerbated by weak liquidity, since August and September have historically been challenging months for risk assets."

"Markets are finally catching up with the subpar global growth environment, resetting equity multiples in anticipation of very low nominal GDP growth – or slow deflationary expansion." "Markets are also concerned that tighter U.S. monetary policy could become counterproductive for the current U.S. business cycle expansion," Mr. McIntyre said. "The Fed has three mandates: two are official, the other implied. Price stability and full employment are official, but financial market stability is implied. Of those three, employment is the only reason for the Fed to tighten."

"Moreover, the US dollar's valuation, credit spreads and financial markets – through the recent wealth destruction – have already tightened financial conditions for the Fed. As such, we believe the Fed will have to back away from its tightening bias and might be on hold into 2016."

Those thoughts were largely echoed and expanded upon by the team at Permal.

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