The document summarizes economic concerns from a single day in May 2012. It discusses Greece potentially leaving the eurozone and going into economic collapse. It also mentions the weakening European economy, troubles in the European commercial real estate market, and issues with J.P. Morgan that were hurting market sentiment. However, the document expresses that diversification may help investors weather volatility and that the outlook is better than 2008-2009 despite some challenges still existing.

1. May 2012
A Day’s Worth of Shocks
By: SEI Investment Management Unit
Looking in the rear-view mirror, our first-quarter 2012 calling into question its ability to pay its debts. The end
economic outlook’s theme of “watching out for shocks” result could be a financial crisis.
appears nearly clairvoyant. A glance at financial Currency Markets Are Showing Heightened Volatility
headlines on just a single day reveals a long list of Concerns about Greece and the possible breakup of the
concerns, including: EMU are fostering volatility in the currency markets.
Greece Is Teetering on the Brink of Collapse As of May 16, 2012, the Dow Jones Industrial
The country’s election ousted the pro-austerity Average Had Fallen for Nine of the Previous 10
government. The new leaders are unable to form a Trading Sessions
coalition government. Depositors are pulling their money The markets are displaying short-term reactions to
from the banks, and the country’s departure from the current concerns.
European Monetary Union (EMU) appears imminent.
Our View: Addressing the Shocks
The Eurozone Is Near Recession The smorgasbord of negative headlines—from just a
After losing ground in the fourth quarter of 2011, the single day—is enough to cause unrest among investors.
eurozone posted 0.1% gross domestic product (GDP) SEI’s active investment management process takes
growth for the first quarter of 2012. Growth in Germany issues like this into consideration every day. Our
helped the region post a gain by the slimmest of perspectives are reflected in the ways in which we have
margins, narrowly avoiding two quarters of negative positioned our portfolios for current market conditions. In
GDP growth. general:
The European Commercial Real Estate Market Is in Our Funds have little or no exposure to Greece.
Trouble We are underweight Europe in our equity Funds.
Falling occupancy rates and lower rents are causing We are overweight Europe in our fixed-income
defaults in Europe’s commercial real estate sector. This Funds.
comes as a long list of European nations slips in to We view the J.P. Morgan/regulatory issue as good
recession. news for fixed-income markets.
Our Funds are underweight U.S. Treasurys.
J.P. Morgan Casts a Cloud on the Market Our Funds are underweight the euro.
The big bank made what appears to be a speculative bet We are strategic investors. We do not believe
that blew up, costing the firm billions. While a few billion investors should be holding stocks if short-term
dollars barely makes a dent in the company’s profit losses are a primary concern.
margin, the timing could not have been worse, as
regulators are focusing on exactly this type of risk in their While there is no doubt that we are living through some
efforts to shore up the banking sector. challenging times, we think we see continued progress.
The U.S. economy is slowly muddling along, the U.S.
The U.S. Government Is Heading Toward Another election will bring clarity for the next four years, the
Debt-Ceiling Showdown global banking sector is addressing its challenges,
Political squabbling highlights the ongoing dysfunction in European elections will provide insight into what comes
Washington and undermines the nation’s credit rating by next for EMU, and—perhaps most importantly from an
investor’s perspective—diversification may be working
in investors’ favor. While we are not raging bulls and still
© SEI / Commentary / ©2012
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2. anticipate volatility ahead, we are significantly happier should be, too.
today than we were in 2008 or 2009. We think investors
This material represents an assessment of the market environment at a specific point in time and is not intended to be a
forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as
research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a
recommendation to purchase or sell a security, including futures contracts. There is no assurance as of the date of this
material that the securities mentioned remain in or out of SEI Funds.
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Investments Company.
To determine if the Funds are an appropriate investment for you, carefully consider the investment objectives,
risk factors and charges and expenses before investing. This and other information can be found in the Funds’
prospectuses, which can be obtained by calling 1-800-DIAL-SEI. Read them carefully before investing.
There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks
as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from
differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly
focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value
as interest rates rise.
Diversification may not protect against market risk. There is no assurance the objectives discussed will be met. Past
performance does not guarantee future results
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May Lose Value
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© SEI / Commentary / ©2012
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