November/December Year-End 2016

November/December- Year End: Holiday Bash

First and most importantly, to all our clients, friends, family members, and the Good Lord, thank you. From a financial perspective, the yuletide that came this season started in November with an election. Many around the country were less than pleased at our choices for President of the United States, but I really don’t think that had anything to do with America’s vote. The November election was an economic vote for the capitalism that has made this country great since the times of our Founding Fathers. Annual GDP growth of 2% won’t touch our debt and the socialistic model of economics won’t help us become a happier more prosperous nation.  The country voted for something different, and the current market run up is the “excitement” of what that kind of future that capitalism might hold. Will the President-Elect deliver, follow these principles, and not play Washington politics at the expense of all of us? Who knows? But as Tom Cruise said to Kelly McGillis in the 1985 blockbuster movie, Top Gun, “it’s looking pretty good so far.” President-Elect Trump seems to “get it,” but we will see. He must pay attention to our current debt as well as his other policies.

Second, the post-election rise in the stock market was unpredictable at best, but our clients have participated and have been rewarded. We have been blessed with proper insight into allocations for that kind of situation, and I am happy to report good tidings. Prior to the meteoric rise, we were hovering around the 3-5% pretax return range for 2016. This wasn’t bad, but given the capital markets’ gift, we like the current state of asset values better! What we will point out that is much more important is that the rise in values is a perfect example of why you “have to be in the market.” The market has been incredibly volatile over the past 8-10 years. This period is no exception. All the old statistics would show us that if an investor “missed” the best 10 days of the market over a roughly 20 year period, the difference in results was mind boggling. Business Insider, authored by Sam Ro on March 12, 2015 quoted from JPMorgan, “if an investor stayed fully invested in the S&P 500 from 1995 through 2014, they would’ve had a 9.85% annualized return. However, if trading resulted in them missing just the ten best days during that same period, then those annualized returns would collapse to 6.1%.” This is also why we think benchmarking is relevant to very few. Our point in giving you this information is NOT to suggest that it is right, or we believe all clients should be 100% invested in the S&P all the time. No. There are age, cash flow needs, and individual considerations related to access of the clients’ capital that would make this evidence as a hard and fast rule improper. What we are saying is that a “long, buy and hold perspective” on the markets is necessary, even though those nerve racking times are inevitable to achieve the client’s overall goal. Even as professionals, we find that this principle is easier said than done. People’s human emotions are bound to get in the way; however, it is our job to guide you and keep you primarily safe and on track to meet your needs. We take this fiduciary responsibility with the utmost of trust and responsibility.

Third and finally, none of us know what the New Year will provide. What we do know is that we as a nation need to follow our Founding Fathers precepts, heal, work hard, love effusively, and give joy and thanks to our friends, colleagues, and those less fortunate. I hope you all had a wonderful holiday and may your New Year be bright.        

A.G. Campbell Advisory, LLC

October 2016 Commentary

October 2016 Commentary:  BOO!!!!

October was frightening but not unexpected. September and October are generally the two worst months in terms of market performance each year. This October, the specter of an unhinged political landscape, Janet Yellen’s promise to raise interest rates, and earnings season have taken their toll on the market’s performance. The Russell 2000 was down (4.75%) this month, as was the S&P 500 (1.82%). This is why we all must be long term investors and maintain liquidity at all costs. There is no way to do what is suggested on entertainment shows like CNBC. They seem to think it is valuable advice to let investors know when to get invested and when to go to cash. I would simply say that this is a fairy tale. The general economic foulness that infected the month of October along with the fun political games were mainly related to interest rates and healthcare. The two industry areas that were the most negative in this month were REITs and healthcare related stocks. Additionally, pharmaceutical and biotech companies have suffered. The ever increasing costs of health insurance for employers and workers also adds to the October pain. In the REIT world, it’s simple. Yellen will raise rates in December, and interest rate sensitive stocks are most negatively affected by her action. Therefore, REITs generally will have a decline in this environment.

So, is there any good news? Yes. While the S&P has been down in October, it is up 5.8% YTD. Relatively low interest rates should keep the housing market alive, and any change from the current political administration is probably seen by the market as refreshing. The possibility of compromise is back in the wind, and the holidays are nearly here. We can leave the pundits behind for a while and focus on our families. For me, this is generally a net positive as I hope it is for you.

Warmest Regards,

A.G. Campbell Advisory, LLC

September 2016 Commentary

Yawn……

September was about as boring and sideways a representation of the stock market as one could find. If it were not for the fact that we “could’ve” had a possible move up in interest rates, it would have been completely lackluster. The fact that the Federal Reserve didn’t raise interest rates is very telling about what they “really” think about our economy. While the labor numbers are better, I am certain that we will be getting confirmation of a U.S. manufacturing slow down soon enough. From my perspective, there is still a giant disconnect between Wall Street and Main Street.

Most people have spent September listening to our shining examples in American politics and paying less attention to investments. The sideways movement of stocks in September was not something new. Most September and Octobers on Wall Street are generally sideways to very negative. The election isn’t helping with how much the market hates uncertainty and add to that any of Putin’s threats, and the future seems opaque. Bond yields have generally increased on rumors of a certain December rate hike and have provided market tumult in early October.

Our stance is that we are taking the rest of this month to finish most of our tax loss selling to offset capital gains, and reposition for what we think will be a better Q4 and a bumpy 2017. Our 2017 outlook means that our investment in equities must be solid citizens, have strong balance sheets and pay dividends. Additionally, we think it “is” time to make and keep a more healthy allocation to intermediate term bonds. The bonds must be of the highest quality and either tax free or AAA corporate credits. Additionally, we would like our clients to have approximately 15% cash going into the New Year. This will allow us to take advantage of the Fed’s propensity to manipulate our markets.

Finally, now is a good time to review your time horizon goals. Just remember, if you are going to retire in more than 5 years, but less than 10 years, we would still have you maintain 60-65% U.S. and International stocks. There really isn’t any other place for investors to go to have the chance of exceeding a 6% taxable return; therefore, like water, we think your money will still continue to follow the path of least resistance in the near term. Longer term, our review process will pinpoint exactly where we think your capital should be.

Enjoy the Autumn!

Best Regards,

Zandy Campbell 

August/End of Summer 2016 Commentary

This summer the market fared better than it has in years. Earnings were okay, and there were no real “blow-ups” of any sort. Oil stayed pretty resilient in the mid $40’s, and interest rate moves by the Fed were off the table until September at the earliest. All in all, things were pretty good. The markets put together gains between 3 and 5% which has been highly irregular in past summers, and the indices have been continuing to make new highs.

The specter of the fall brings national presidential elections and FOMC possible rate changes. In brief, there will be much more volatility and room for downward movement in stocks as precipitated by that great fear of the unknown. The questions that loom are: who will win the election and what effect will it have on my portfolio? Which candidate is better for the stock market? Which candidate is better for the country? Is the Fed really going to raise interest rates when much of the data is not overly upbeat? How will this all affect me? Maybe I better move to cash? These are all thoughts that people are having today and are normal.

The truth is that for corporate earnings to continue on a very positive note, we believe that our country has to have corporate tax reform. The cost of doing business is too high a percentage of profit margins. Businesses have cut most of their infrastructure to the bone and now growth and demand may only be spurred by a better economy. At the moment, the macroeconomic policies of the Fed and our present administration seem to have failed to take advantage of the opportunity to have a more robust period of growth; thus, we have what is considered to be the weakest economic recovery from recession of all time. The IMF is asking for the Fed to be more dovish as opposed to its recent hawkish sentiments. Frankly, the IMF would like central banks around the world to keep the cheap cash machines running. We think Lagarde may be correct because the current global melody of inaction may stall our recovery engine, and this is a huge risk. Ultimately, the only real answer is for the U.S. to lead from the front with more business-friendly policies. 

A.G. Campbell Advisory’s investment stance heading into this fall is to trim profits, sit on cash and wait for the inevitable opportunities given the volatility of the geopolitical and economic climate. The election news cycle fallout is certainly to provide ample entertainment. 

A.G. Campbell Advisory, LLC

 

July 2016 Market Commentary

•    The post-Brexit market rally has soothed the currency migraines of June. 
•    The 10-year Treasury is off its lows of 1.37% immediately following Brexit to be at 1.59% today. 
•    Most earnings have been reported and on balance were positive. 
•    July jobs report were okay with 255,000 new jobs, and the posted unemployment rate was 4.9%. 
•    July was marked by lower volatility in the stock market than the “norm” for July. 
•    The S&P 500 gains more than 3% in July which leaves many to worry more about the month of August. August is traditionally a weak and volatile month. 
•    Derivative positioning is starting to be much more bullishly weighted. My being more of a contrarian makes me feel that this data might be indicative of effusive optimism in the stock market. Although, I am the worst market timer with whom I have ever been acquainted. 
•    Big S&P 500 ETF inflows crowned July 2016 as the third largest month since 2011. 
•    The U.S. Consumer remains resilient and keeps economy going, while oil prices have fallen off their recent highs of nearly $50/bbl. It seems clear that July is showing us that U.S. companies have generated superior returns on capital, despite the overall low growth environment. These better returns on capital are proven through the better earnings reported this month, and the commensurate prices of these stocks surge. 
•    The technology sector led all the sectors of the S&P 500 in July with blowout earnings. Multiple money managers and market technicians are now saying that we are in a secular bull market. While I don’t believe anyone is that good at calling market tops or bottoms, I do believe that stock prices are still climbing a wall of worry in August. We are nowhere near irrational exuberance or unbridled optimism. 

July Takeaway- Keep letting the positive global markets work for you. 

Best Wishes for the Remaining Summer

Zandy Campbell