April and May "B's" To Come

In the very popular 1950’s television series, Dragnet, Sgt. Joe Friday would always say, “just the facts, ma’am.” Well, here is our April monthly and overall download for you: the statistics of the market and its metrics say that everyone is treading water. Specifically, from right now going back one year, the S&P 500 is down a couple of percentage points. The PE multiple of the S&P 500 then was approximately 17.2X earnings, and it is approximately 16.5x earnings now. In general, earnings have moved sideways and interest rates have stayed pretty much the same. The dividend of the S&P 500 is approximately 2.2% now and the ten year treasury yields are now approximately 1.71%. Investment grade corporates are about 3% or slightly less for the same 10 year maturity. Therefore, no one is moving anywhere quickly.

Other notable facts are that the transports are declining. Over my 30 year career, when you see transports declining, often times, economists say that this is an indicator of weak demand. As a firm, A.G.Campbell Advisory believes that market values of U.S. stocks are relatively high. There are small pockets of value, but lately, they have been traps. Last, oil prices are inching up towards $50 per barrel which has mainly been caused by disruption in flow due to terrorism; therefore, it is not a “real” indicator of growing economic demand. April was up a quarter of a percent, and the market seems to be stuck in a fairly tight and fairly valued trading range.

At this time, we feel that cash positions of 10-25% are reasonable and that we may soon be seeing the “sell in May and go away” summer strategy taking shape. Given all of these facts, it is time to “B” a profit taker, “B” adividend collector , and “B” okay with some extra cash in money market. Have a good May!

Zandy Campbell

Mark Scott

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