Merger Arbitrage Stays Put Despite Political Meddling

Over the recent months, the rally in risk assets pushed equity valuations to unprecedented levels since the early 2000s, leading investors to ponder whether this is a good time to reduce risk in portfolios. Yet, the likelihood that the Fed will extend asset purchases at the next FOMC meeting on September 16th suggests investors should not play too defensive. With bond yields not far from all-time lows in the U.S. and Europe, the opportunity set within defensive assets is reduced as well.