Second Quarter 2017 Commentary

2nd Quarter 2017 Investment Commentary

The United States economy looks better than it has in a long time. The U.S. GDP was somewhat slow in the first quarter at 1.2%. We think the second quarter growth might be closer to 2.5%. Generally speaking, unemployment has dropped to its lowest levels in 17 years, but we are not naïve to the fact that there are many who are still under-employed. Additionally, there are those people who simply are not qualified or trained for today’s labor force. Stocks have hit their highs this year and have outperformed bonds for six years in a row. The first half of the year was dominated by lower price/earnings multiples and increased market volatility.

The political songs of excitement of the first quarter have all but faded to the monotony of Washington’s log jam that is endless and uninspiring. Can the Republicans get “repeal and replace” done? Few think so. Can the Republicans get anything they promised done? We’ll see. The main streets of America need some healthcare, tax, and regulation relief and so do our companies. For the best possible outcome, there will have to be true bipartisanship; therefore, count on something in between.

Finally, on a positive note, the corporate earnings train of the 2nd quarter looks promising. The forecasts or consensus is for year over year earnings to rise at the 8% level for the second quarter and 11% for the year. Wages remain sluggish which is very likely due to the current business environment which is still over regulated. Europe and other countries have far more favorable valuations than the U.S. at this time and global trade could drive this leadership even more.

A.G. Campbell Advisory, LLC believes that the Fed will continue to raise rates one more time this year and with President Trump’s new Fed appointee, Randal Quarles, the Fed will focus on dissecting Dodd-Frank. All of this bodes well for financials and industrials. It is our opinion that growth will moderate over the next 6-12 months but will continue due to positive corporate earnings. This tends to be exactly the type of environment where stock pickers often fair better than passive investors. We will see what fate holds for us.

Wishing you an enjoyable summer,

A.G. Campbell Advisory, LLC

First Quarter 2017 Commentary

1st Quarter Commentary 2017:   Back To The Future

Hold on sports fans, it ain’t over ‘til the fat lady sings. Feeling like 1985? Kind of Reaganesque? Whoa Bessie, as Jim Cramer loves to say, “Now we are over the tips of our skis.” Here’s what we know: we elected a President who is definitely business friendly and wants very badly to take 100% of the credit for reigniting the American economy. Since his victory in early November of 2016, the increase in the S&P 500 has been nearly 10%! Please understand, this move in the market is based completely on what may come. We all enjoyed this drunkenness through February of 2017 and then we began treading water. The first obvious cold water on our party was the unsuccessful healthcare bill that was never to be. That loss put a question in the mind of Mr. Market as to whether Trump’s other agenda items would be any more successful than his first legislative attempt. Consequently, March of 2017 traded in a fairly tight range and most broad equity indices ended relatively flat on the month, but up between 4-6 percent on the year.

The 1980’s were characterized by Reagan in two specific areas: military strength and the courage of his convictions, and tax reform with the Tax Reform Act of 1986. Without some corporate tax relief and a semblance of a new healthcare program, the markets could definitely lose confidence in “The Donald.” Currently, without some very positive earnings, most stocks are poised to move sideways and to be very susceptible to political bombshells. So, what does one do? Is the Fed going to increase rates again any time soon? Is North Korea going to be properly held in check by China? What could any and or all of these items do to our market, and what is the proper strategy?

Simply put, check your cash for upcoming needs and make sure it’s in the money market. Other than that, we advise staying long the market just as we did through the 80’s which included 10/19/87 because there isn’t a better game in town. Also, have enough cash to take advantage of a 1987 or a 2008 type of scenario. Look at the returns on monies invested very shortly after those periods. Finally, turn off CNBC and get ready to enjoy a beautiful spring.

Warmest Regards,

A.G. Campbell Advisory, LLC

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