Year-End 2018 Commentary

Happy New Year: 2019!!! What to do?


·         Do anything other than sit there and listen to the national pundits tell you about the volatility in the market and how bad everything is. Don’t get caught up in the constant news cycle, as they tend to be short-term oriented, and sensationalize to enhance their ratings.

·         Remember the importance of history. History teaches us that trying to time markets is a loser’s game. No one, not even the huge institutions, do this well. The only way to make money in the market is a longer term, value oriented, buy and hold approach. As Warren Buffet says, “he tunes out the noise.”

·         Ask yourself, what is real?

·         Low unemployment

·         Slow growth economy

·         Corporate tax benefits

·         National wages are up

·         Low to no inflation

·         Cheaper Gas & Oil Prices

These are not the components of a recession that the stock market has already put into its’ lower prices and volatility.

·         What are the real negatives?

The real or perceived negatives are as follows:

·         A possible trade war with China

·         A Fed who blindly raises interest rates to drive us into recession

·         A Global Slowdown

·         Political gridlock and nothing getting done.

·         More domestic and global debt.

Of all of the above possible negatives, most of them are not nearly as likely or as ominous as some would like you to believe. And quite frankly, these risks are always inherent in the equity markets.

We believe that the Fed will only do what is necessary to keep our economy from overheating. There probably is no great time for them to be “unwinding” their balance sheet, but it will have to happen over time. Everyone is so set on their raising interest rates twice more in 2019. I am not convinced. Why? To slow down what? Either way, it neither makes nor breaks us.

Global slowing is a natural part of the business cycle, but business by no means has grinded to a halt, and I think everyone from the ECB to the Fed is conscious of the danger of stopping forward movement on the back of a slow recovery. Additionally, the Fed is aware of the higher carrying costs that will result by continuing to raise interest rates. They know that this makes it harder for us to pay our debt service, and they benefit from our survival, not our demise.

 A trade war is bad for everyone. The United States and China are so inextricably intermeshed that the leader would not let this happen. Furthermore, China’s economy is terrible, and a trade war would be a dagger in the heart of their trying to recover. Trade wars never offer the protectionist benefits that feel patriotic and get politicians elected.

Finally, the stock market generally loves political gridlock. The cynical thinking has always been that if the politicians cannot get anything done, they can’t screw anything up! The market loves predictability and hates uncertainty. This entire writing is a long way of saying that, “this too shall pass. “

With warm regards for a prosperous 2019.

Alexander (Zandy) Campbell

Third Quarter 2018 Commentary

Staying the Course and Enjoying the Ride

The third quarter proved to be good for most U.S. equities, and investors welcomed a more gentle summer. Gradually increasing U.S. interest rates are tightening financial conditions around the world. The Fed has indicated that they will be raising rates for the foreseeable future, and this will lend itself to a stronger U.S. dollar. All this having been said, we believe that the markets will push through decent returns in equities through the remainder of 2018.

We believe as we move into the fourth quarter of this year, it is okay to take some capital gains. Politics will be changing our footing with the midterm elections, and we always have the risks of the emerging markets or another country’s currency ills resounding through our markets. This is all to simply say that it is getting later in the game, and we expect volatility and probability of market corrections to increase.

The underpinnings of U.S. growth are still strong with the tax cuts and low unemployment, and we still prefer the U.S. to other markets. Now is a good time to check our portfolio resilience and be comfortable with our weightings in regard to risk tolerances. Finally, we think year end should provide a good atmosphere for retailers and the holidays, and we see a reasonable fourth quarter ahead. This is a good time to stick to our investment plan, take some gains, and stay in short maturities in our fixed income.

Happy Fall,


Second Quarter 2018 Commentary

Trump Bump Down to a Nudge?

The first half of 2018 has been anything but boring, although the markets have yielded the investor very little. Literally, with all the wild moves of several hundred points in a day, the first half has returned just 2.65% for the S&P 500, while the Dow Jones Industrial Average was down 0.73%.

The big winners of the first two quarters would be oil stocks, with technology a possible second, again due to the F.A.N.G. stocks (Facebook, Apple, Netflix, and Google). By comparison, the small and mid-cap stocks have enjoyed a much more positive move for the same time period. The reason for this divergence is that the tax cuts have proven more helpful to the little guy, and most of these companies are not exposed to trade worries. Conversely, the big losers were the industrials and the banks.

The reasoning is simple, the industrials have exposure to China and oversees currency risk, as well as trade war risk. The financials in general came down in the first half of the year due to a flattening yield curve. The thinking is that if the spread decreases between the banks’ borrowing rate and the consumer loan rate, the banks will be hurt by the flattening yield curve. Finally, the yield curve flattening is one step away from it actually inverting. An inverted yield curve has often been the signal of a shortly ensuing recession.

Having hopefully dispensed with all the bad news, here is the good news: first, unemployment is approximately 3.8% which is a historic low. Interest rates have not skyrocketed, and our Fed has taken measures to insure against this occurrence by raising short term rates. Companies are reporting excellent year over year operating results, and the economy is chugging along. The consumer has been doing their part, and we perceive ourselves to be more secure today from domestic terror related events.

With all of this being said, the second half of the year seems to be setting up in a similar fashion to the first half. Some catalysts for future volatility might be the mid-term elections in November, with the appointment of a Trump appointed Supreme Court justice hanging in the balance. Additionally, some of the bad actors, such as China, Russia, and North Korea still present unknowns in relation to NATO and trade talks.

We find ourselves asking, “what to do now?” For the most part, we believe very little. If you are happy with your allocation to stocks and cash, stay put. If you have more cash to put to work, we suggest averaging into the markets at this point. In other words, now is a time to be very slow to act. If we get a decent pullback in the Fall, we might take a look at some of our quality favorites. Otherwise, our suggestion is to stay invested and try to turn off CNBC as much as possible.

Once we get the sand out of our shoes in September, we will begin to see the formation of a more engaged investment landscape.

A.G. Campbell Advisory, LLC

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

Fourth Quarter 2017 Commentary & 2018 Outlook

2017 Performance and 2018 Outlook:


·         The Trump Bump accounted for a 6.5 trillion dollar increase in the U.S. economy, low interest rates, and more jobs created by any President in recent memory.

·         The S&P 500 closed up the year over 21% in positive returns and the only asset class to be negative was commodities.

·         The Tax Deal was completed in late 2017 and will take effect in 2018 and should be a net positive for the markets. Everything from lower corporate taxes to a one time low tax on repatriation of large corporate profits held overseas could add quite a kick to our New Year.

·         Foreign stocks and emerging markets were a good place to be in 2017

·         Geopolitical tensions began to ease at year end with increasing domestic political tension.


·         Increased volatility due to extended bull market. Speculators will aggressively trade the dollar, bitcoin, and the VIX index itself. Everyone will be looking to call an end to this long bull market.

·         For reference purposes, the longest bull market in history was from 1990 to 2000 and extend over 113 months. Today, this bull market is standing at 105 months.

·         We advise 15-20% cash taken from high flyers and equity profits. In the equity space, we generally feel that clients should ride out their holdings. Options, short term bonds, and cash can be used to minimize volatility; therefore, the theme is to stay “long” quality equity and not panic, no matter what the volatility.

·         The biggest risk we have faced over the past 30 years is time spent “out “of the market and an inability to return to it.

·         Our outlook is for 2018 to be a year of higher volatility, an increase in domestic political fighting with the upcoming midterm elections, and a general increase in corporate profits. Stocks are still going to be “the place to be,” provided that investors can handle the natural corrections. We also favor international investments in that there are still values to be enjoyed in those markets. Finally, we are net bearish on bonds of all types. We would prefer tax free to taxable in general and would stay away from any type of junk. Short term municipals would be our alternative to treasuries or cash.

·         For those interested in which companies will benefit the most from the tax deal, we would suggest the industrials, consumer staples and telecom. These companies were taxed at generally the highest rates.  Most of the benefit has already been derived by the Energy and Technology sectors, but the actual implementation will still be felt in their balance sheets. Finally, consumers and small business will be net winners.

·         In summary, this is a year when knowing your risk tolerance and asset allocation will be as important as any.

Happy New Year!!!!