April 2015 Market Commentary

Spring has sprung! Our clients’ portfolios were up 2.14% in aggregate for the month of April, with the S&P being up 0.96%. Obviously, this is after a painful 6-9 months of oil prices going from $101-$48/bbl. When commodity prices fall that far and that fast, the best thing you can do is absolutely nothing. The CBOE Volatility index, the market’s fear–gauge, climbed 7.9%, and decliners outpaced advancing stocks by a 2:1 margin. Therefore, we are kicking “tail” and taking names! So, why doesn’t it feel like it? The answer is we are “regaining” some of last year’s gains which evaporated after the second half, commensurate with the fall of oil prices and natural gas. Technically, this year, we are ahead of the market by approximately 1%.

The reason that none of this information should matter is that we don’t invest our money, your money, or anyone else’s money for 1 month, 3 months, 6 months or even a year. We invest in equities for no less than a minimum of 10 years. Imagine if you had invested in the S&P 500 beginning in 2000 and wanted to take your money to retire in 2010. Chances are you experienced almost ZERO growth. The key for most of us is equaling the money we spend over the long haul. There is not a single client for whom we are not accomplishing that task. We may have back to back quarters or even down years, but we truly achieve our fiduciary responsibility by helping our clients not outlive their money. Our target for most clients living on their portfolios is a distribution rate of 4% per annum. Even with a 50/50 stock to bond allocation, one could expect to easily pay that percentage rate for 35-50 years.

The Federal Open Market Committee’s two day policy meeting seemed to conclude with a question mark about the momentum of economic growth. The reason that this is important is that if they felt conviction about the economy, we would all know that the “raising” of interest rates would be sooner than later. My bet is that the Fed waits until September to raise rates and hopes that the summer holds more gains in household incomes and consumer sentiment. Higher rates are a necessity for many reasons economically, and politically. 

Mark Scott

A.G. Campbell Advisory, LLC, 1340 Smith Avenue, Suite 200, Baltimore, MD 21209