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

Mark Scott

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