We have been writing for the past few quarters on the pressures facingmulti-national industrial companies. Last week we heard from a number of industrial bellwethers such as Caterpillar and DuPont, and the results failed to impress. With large exposures to the slowing economies of Europe and Asia, many companies are seeing top-line weakness and have run out of options such (cost cutting) for continuing to grow earnings. For example, CAT’s revenues were down 16% y/y with net income down 50%. An ill-timed acquisition of mining company Bucyrus and end-market exposures to Asian construction markets are major contributors to CAT’s struggles. Overall, second quarter revenues for S&P 500 companies excluding banks are expected to grow just 1.1%, with earnings expected to fall 0.6%. Despite the weakened fundamentals, corporate bonds have outperformed most other sectors in July. Companies have taken advantage of this relative outperformance and demand from investors by selling $34 billion in debt last week, the highest weekly total in 2 months. Corporate credit fundamentals are weakening at the same time as the sector outperforms, setting the stage for a reduction to our corporate exposure in certain accounts as we wait for more attractive entry points.