1st Quarter 2018 Commentary

Rollercoaster Rides Are Scary BUT They Do Stop

I have met so many people in the financial industry, outside of the industry, investors, and money managers, and they all say the same thing: “this market is exhausting.” If we look at 2017 as one of the least volatile years on record, 2018 has begun as its’ bitter cousin. 2016-2017 will be seen as the Trump party, and now we must come back to earth and deal with reality. Our forecast is for muted returns this year verses last year and headwind risks are likely trade wars and higher interest rates. Eventually, the market will digest these items.

The 1st quarter volatility of 2018 came with a vengeance. The January to February selloff took most major averages down in the double digit range. At the peak, the drop was over 10%. Most of what we all are experiencing has little to nothing to do with the true value of the companies in the market. The stock market is reacting to the highly unpredictable style of the president. During this quarter, the market has all but ignored the strong earnings growth momentum, tax cuts and repatriation. These bullish facts will become more apparent during the first quarter earnings report season. We still think it make sense to overweight financials and selective technology. In general, we think market fundamentals are strong and on pace. At this point, we favor value companies over growth, and would also use this year to take some gains.

In the first quarter, the Dow was down 2.5% which ended to its’ nine-quarter gain streak. The S&P 500 was down 1.2% which also broke its’ rally record. In divergence, the NASDAQ was up 2.3% and the Russell was down 0.4%. Overall, the New Year came in with the winds of worry. We believe that some of this volatility will settle down as the geopolitical risks abate. While it continues, we suggest that our investors adopt the same attitude as Warren Buffet. Mr. Buffet believes that most of the political and other noise that we hear that stirs up market volatility needs to be tuned out. He thinks that market volatility causes more people to unintentionally harm themselves than anything else. We tend to agree.

Warmest Regards,

Zandy Campbell

Mark Scott

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