Market Commentary

October 2016 Commentary

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October 2016 Commentary:  BOO!!!!

October was frightening but not unexpected. September and October are generally the two worst months in terms of market performance each year. This October, the specter of an unhinged political landscape, Janet Yellen’s promise to raise interest rates, and earnings season have taken their toll on the market’s performance. The Russell 2000 was down (4.75%) this month, as was the S&P 500 (1.82%). This is why we all must be long term investors and maintain liquidity at all costs. There is no way to do what is suggested on entertainment shows like CNBC. They seem to think it is valuable advice to let investors know when to get invested and when to go to cash. I would simply say that this is a fairy tale. The general economic foulness that infected the month of October along with the fun political games were mainly related to interest rates and healthcare. The two industry areas that were the most negative in this month were REITs and healthcare related stocks. Additionally, pharmaceutical and biotech companies have suffered. The ever increasing costs of health insurance for employers and workers also adds to the October pain. In the REIT world, it’s simple. Yellen will raise rates in December, and interest rate sensitive stocks are most negatively affected by her action. Therefore, REITs generally will have a decline in this environment.

So, is there any good news? Yes. While the S&P has been down in October, it is up 5.8% YTD. Relatively low interest rates should keep the housing market alive, and any change from the current political administration is probably seen by the market as refreshing. The possibility of compromise is back in the wind, and the holidays are nearly here. We can leave the pundits behind for a while and focus on our families. For me, this is generally a net positive as I hope it is for you.

Warmest Regards,

A.G. Campbell Advisory, LLC

September 2016 Commentary

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September was about as boring and sideways a representation of the stock market as one could find. If it were not for the fact that we “could’ve” had a possible move up in interest rates, it would have been completely lackluster. The fact that the Federal Reserve didn’t raise interest rates is very telling about what they “really” think about our economy. While the labor numbers are better, I am certain that we will be getting confirmation of a U.S. manufacturing slow down soon enough. From my perspective, there is still a giant disconnect between Wall Street and Main Street.

Most people have spent September listening to our shining examples in American politics and paying less attention to investments. The sideways movement of stocks in September was not something new. Most September and Octobers on Wall Street are generally sideways to very negative. The election isn’t helping with how much the market hates uncertainty and add to that any of Putin’s threats, and the future seems opaque. Bond yields have generally increased on rumors of a certain December rate hike and have provided market tumult in early October.

Our stance is that we are taking the rest of this month to finish most of our tax loss selling to offset capital gains, and reposition for what we think will be a better Q4 and a bumpy 2017. Our 2017 outlook means that our investment in equities must be solid citizens, have strong balance sheets and pay dividends. Additionally, we think it “is” time to make and keep a more healthy allocation to intermediate term bonds. The bonds must be of the highest quality and either tax free or AAA corporate credits. Additionally, we would like our clients to have approximately 15% cash going into the New Year. This will allow us to take advantage of the Fed’s propensity to manipulate our markets.

Finally, now is a good time to review your time horizon goals. Just remember, if you are going to retire in more than 5 years, but less than 10 years, we would still have you maintain 60-65% U.S. and International stocks. There really isn’t any other place for investors to go to have the chance of exceeding a 6% taxable return; therefore, like water, we think your money will still continue to follow the path of least resistance in the near term. Longer term, our review process will pinpoint exactly where we think your capital should be.

Enjoy the Autumn!

Best Regards,

Zandy Campbell 

August/End of Summer 2016 Commentary

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This summer the market fared better than it has in years. Earnings were okay, and there were no real “blow-ups” of any sort. Oil stayed pretty resilient in the mid $40’s, and interest rate moves by the Fed were off the table until September at the earliest. All in all, things were pretty good. The markets put together gains between 3 and 5% which has been highly irregular in past summers, and the indices have been continuing to make new highs.

The specter of the fall brings national presidential elections and FOMC possible rate changes. In brief, there will be much more volatility and room for downward movement in stocks as precipitated by that great fear of the unknown. The questions that loom are: who will win the election and what effect will it have on my portfolio? Which candidate is better for the stock market? Which candidate is better for the country? Is the Fed really going to raise interest rates when much of the data is not overly upbeat? How will this all affect me? Maybe I better move to cash? These are all thoughts that people are having today and are normal.

The truth is that for corporate earnings to continue on a very positive note, we believe that our country has to have corporate tax reform. The cost of doing business is too high a percentage of profit margins. Businesses have cut most of their infrastructure to the bone and now growth and demand may only be spurred by a better economy. At the moment, the macroeconomic policies of the Fed and our present administration seem to have failed to take advantage of the opportunity to have a more robust period of growth; thus, we have what is considered to be the weakest economic recovery from recession of all time. The IMF is asking for the Fed to be more dovish as opposed to its recent hawkish sentiments. Frankly, the IMF would like central banks around the world to keep the cheap cash machines running. We think Lagarde may be correct because the current global melody of inaction may stall our recovery engine, and this is a huge risk. Ultimately, the only real answer is for the U.S. to lead from the front with more business-friendly policies. 

A.G. Campbell Advisory’s investment stance heading into this fall is to trim profits, sit on cash and wait for the inevitable opportunities given the volatility of the geopolitical and economic climate. The election news cycle fallout is certainly to provide ample entertainment. 

A.G. Campbell Advisory, LLC


July 2016 Market Commentary

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•    The post-Brexit market rally has soothed the currency migraines of June. 
•    The 10-year Treasury is off its lows of 1.37% immediately following Brexit to be at 1.59% today. 
•    Most earnings have been reported and on balance were positive. 
•    July jobs report were okay with 255,000 new jobs, and the posted unemployment rate was 4.9%. 
•    July was marked by lower volatility in the stock market than the “norm” for July. 
•    The S&P 500 gains more than 3% in July which leaves many to worry more about the month of August. August is traditionally a weak and volatile month. 
•    Derivative positioning is starting to be much more bullishly weighted. My being more of a contrarian makes me feel that this data might be indicative of effusive optimism in the stock market. Although, I am the worst market timer with whom I have ever been acquainted. 
•    Big S&P 500 ETF inflows crowned July 2016 as the third largest month since 2011. 
•    The U.S. Consumer remains resilient and keeps economy going, while oil prices have fallen off their recent highs of nearly $50/bbl. It seems clear that July is showing us that U.S. companies have generated superior returns on capital, despite the overall low growth environment. These better returns on capital are proven through the better earnings reported this month, and the commensurate prices of these stocks surge. 
•    The technology sector led all the sectors of the S&P 500 in July with blowout earnings. Multiple money managers and market technicians are now saying that we are in a secular bull market. While I don’t believe anyone is that good at calling market tops or bottoms, I do believe that stock prices are still climbing a wall of worry in August. We are nowhere near irrational exuberance or unbridled optimism. 

July Takeaway- Keep letting the positive global markets work for you. 

Best Wishes for the Remaining Summer

Zandy Campbell

Head for the Brexit…mmm…Exit!!! – June 2016 Commentary

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What do you think the chances are of our world NOT PANICKING after they have known about the Brexit vote at least since the beginning of the year? Right, none. That is how our financial world seems to operate today: shoot, ready, aim. It makes no sense whatsoever! Make no mistake, the Brexit is complicated by multiple factors, but those hurdles were available to panic over months ago. The truth is that there is no need to panic. There are logistics issues with whom is currently running the U.K. now that David Cameron has stepped down as Prime Minister. Also, there are noises being made by other countries in the EU that supposedly would like to leave as well. Finally, there are real world issues with a much lower British Pound Sterling and a higher U.S. Dollar. The only way parity is achieved is through Pound value erosion verses Dollar inflation. The net sum of possible Brexit outcomes for the good people of the U.K. is as follows: a weaker pound can lead to higher inflation. With higher inflation, either wages can rise to compensate for the price increases, or wages won’t rise and people’s standard of living will decline. Therefore, ironically, the outcome of the vote to leave the EU resulting in a lower quality of life is a real possibility. There are also additional compromises and possible votes and politics on the table all of which could inevitably be destabilizing for the global financial markets.

Nevertheless, in our opinion, this will mean very little for our clients. Many of our recent additions are even higher in the middle of this maelstrom. A.G. Campbell Advisory, LLC thinks that the “Brexit” is probably a future pain in certain ways for the short term, but we don’t think it is “the earth threatening” storm cloud on the horizon. In fact, we think that the news people and clients should be much more worried about an overall global GDP slowdown that may throw us eventually into a recession. The only panacea for all of these financial ills are tax reform and a more business friendly environment.

Our advice on top of all of this information is simple: don’t listen to the “noise” of the financial markets, this “noise” will not help you in the long-term. Our clients are incredibly well diversified and positioned with cash and bonds. We can weather all kinds of storms. So, we think the best thing you can do with your time right now is something else. If there are opportunities created by the volatility, we will find them. Finally, as it relates to the Brexit, ISIS, or any other concerns we may have, the words of former president Franklin D. Roosevelt addressed in 1933 at his Inauguration, “…the only thing we have to fear is fear itself.“ This philosophy is not bravado, and today it is just as valid as it was at that time. I wish all of you a relaxing and carefree summer.

Zandy Campbell

April and May “B’s” To Come

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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

March 2016 Market Commentary

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The first quarter of 2016 began with worrisome declines. January and February racked up major market losses for most of the major indices. At one point, the S&P 500 was down over 9%, oil was falling more precipitously than anyone imagined and the credit markets were flashing red alert in the junk bond area. The institutions were beginning to worry as the spreads in the junk bond markets began to widen and the next step would be illiquidity. The woes of China’s slow down were also weighing heavy on the market indices.

Then, it happened: the magic moment. Federal Reserve Chair Janet Yellen said, “Financial conditions have recently become less supportive of growth.” She further indicated that her much feared interest rate increases were foreseeably not happening in March. Of course, almost on cue, the stock market loved it, and why not? After all, now, it’s the only chance of anyone getting much of a return!! CEO’s across America are cheering because now their anemic earnings that will be announced at the end of the first quarter will be balanced by a month of upward movement in the market! As Kevin Bacon said in Animal House, “remain calm, all is well.”

The single best way to talk about the stock market, stocks, race horses, or the Super Bowl is in the rear view mirror. In fact, we are going to rename our quarterly and monthly commentaries and maybe our future blog as “The Rear View Mirror.” Only the truly sagacious people like Janet Yellen, Barney Frank, and Donald Trump have what it takes to interrupt the natural cycles of economics to bring you a better, yet somewhat artificially manufactured version of their economy. Man, it must be great to be King! Nevertheless, the dice have been cast, and we are now safely in April! Whew! How do you think Chairwoman Yellen will deal with the upcoming earnings misses? Hmmm. Well, these concerns aren’t for the likes of mere mortals like me to postulate. We will continue to have our clients’ assets “in the market,” and still focused on great quality. Furthermore, we will continue to pay homage to market volatility by maintaining an appropriate balance in bonds, cash, and other asset classes. Finally, we will joyfully prune some gains from portfolios prior to the people who, “sell in May and go away.” This adherence to process and discipline has always held our clients in good stead in the past, and we feel confident of that in the future.

Last thing, I wouldn’t be a good Kentuckian if I didn’t tell you who I liked in the Kentucky Derby. I would bet Brody’s Cause on the nose. Good Luck!

Warmest Regards,

Zandy Campbell

February 2016 Market Commentary

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February was dominated by assets moving towards the “risk-off” trade. Most categories of equities around the globe lost ground this past month. Generally, from the traders to the longer term investors, there is an insatiable worry about the global lack of growth. Companies can only get so lean to continue showing year over year profitable comparisons and then demand must return. A lot of the same headwinds are still constant from last year: China’s slowing growth, very little if any wage growth, and a bunch of CEO’s who are still trying to beat the dead horse of the global economy with the riding crop of stock repurchases and corporate buybacks.

As we venture into the middle of March and rounding the ¾ pole of the first quarter of 2016, we are reminded of something an old lacrosse coach once told me: “if you don’t know how to vanquish the enemy, train harder each day.”  That was good advice then as it is now. It means keep doing what has always been smart in the past. The following “remember list” is a checklist of items that will allow you to sleep better despite everything going on in the world, but more importantly, it permits you to control what you can control:

1.       Remember to always maintain enough “cash” on hand so that you can have liquidity when the other fellow doesn’t. We try to do follow this logic with our investors, and we think everyone should do it at home as well.

2.       Remember long term means long term. Therefore, as it relates to money in the U.S. or foreign stock markets, you shouldn’t have your money in that asset class if you cannot leave it alone for at least 5 years at a minimum.

3.       Remember to have some money in very safe short term tax free bonds or the equivalent. The more aggressive investors always hate this advice, especially when it’s too late.

4.       Remember to reach out and call us anytime that you feel uneasy. A.G. Campbell Advisory is founded on the principle of “the buck stopping here.” Our purpose is to provide fiduciary advice and stewardship as often as our clients need. We don’t believe in asking you to stick your head in the sand and suck it up.

5.       Be thankful each and every day because if you are receiving this advisory commentary, there is a high probability that your personal wealth puts you in the top percentile of the world population, and I imagine that most of us have familial relationship riches that far exceed anything that is measured in monetary form.

On the horizon, we are looking for better days ahead and little to no change in view from the Federal Reserve this March. Also, as you know, there is usually a last minute panic for tax information; therefore, please call us at your soonest convenience to ensure you have everything you need. Finally, tax time is also a good time of year to review your financial plan/roadmaps with us and make sure that your charted course is exactly as you expect. If it provides peace of mind during a very normal sideways to down market move, then we feel like this is well worth the meeting. Enjoy March Madness!

Warmest Regards,

Zandy Campbell

January 2016 Commentary

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Happy New Year! Welcome to the worst historical start of Wall Street in 120 years. January, 2016 is characterized by precipitous drops and panic. Many investors still remember the sting of 2008, but this year seems most highly correlated with the oversupply in the oil markets and pressure on current prices. The correlation doesn’t really make any sense to Wall Street historical statisticians; however, I think I get it. Simply, the lower pricing in oil reflects how the world feels about global demand. If China, India, and the United States can’t suck up all the available oil with all the people in the world, a dropping oil price might indicate a “recession.” The “r” word is one of the most hated words by global investors because it portends rainy weather in the stock market with no end in sight.

The metrics of January were an S&P 500 index that closed negative (5.07%). Crude oil was down nearly 10% in the month of January, and China’s manufacturing numbers were abysmal. When you throw in the year of an election in the United States and ISIS threats of a global caliphate as an afterthought, the market declines hard. This is what happened.

Our clients are maintaining extremely healthy cash positions so that we can take advantage of some of these monstrous pullbacks. When investors look back over history, they find that periods of sustained volatility such as we are experiencing now are excellent entry points in the market. Because of our strategic approach to equities, we are highly confident that our clients will be the supreme winners in the end. Establishing low basis in securities is primarily executed in times like these. Therefore, as we enter 2016, be strong and of good cheer because these are the times that propel you way beyond the average clientele of Wall Street. 

A.G. Campbell Advisory’s Market Commandments

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·          You cannot time the market. Calmer heads are created by years of experience as an investor and knowing important facts.

Since 1929, there have been 25 Bear Markets. The average Bear Market lasted 10 months. The average bear market loss was (35%). The smallest loss was (21%), and the largest was (62%) in 1932. The average frequency of Bear Markets is every 3.4 years. The last Bear Market ended in March 2009. Therefore, we are way overdue.

Since 1929, there have been 25 Bull Markets. The average Bull Market lasted 31 months. The average Bull Market gain was 104%. The smallest gain was in 2001 and was +21%. The largest gain was 582% from 1987-2000. The average frequency is every 3.4 years. The present Bull Market is over 72 months old and a pullback is necessary.

·         Things are never different. People incorrectly say that “this time things are different.” Their intent is to explain that the fundamental rules and principles of investing have somehow changed this time around.

For example, had investors not believed that “value investing” had become obsolete from 1995-2000 and bought dot coms with stretched valuations, much money could have been saved. They justified their actions by saying that the old principles of investing didn’t apply and that the technology revolution justified the crazy prices. They were wrong.

·         Turn off CNBC and leave the worrying to us. Part of hiring an investment advisory firm is to allow us to act in your best interest and for you to do other things.


·         Have enough cash and fixed income investments to make the moves in the market of little concern. This allows you to be a long term investor in stocks and reap the rewards.


·         Own investments that have been through the ups and downs of the markets and have been fine.

For example, American Express Company (AXP) traded at $9.71 during the financial crisis on March 06, 2009.  It has been as high as $93.17 in early January of 2015 and closed today, 1/13/16, at $62.85. As an intelligent investor, you must ask yourself: was AXP really worth 6-700% less than today, just 6.75 years ago? No, of course not. These are the results of the extreme movements of the market in irrational market panics!

·         “Buy right and hold tight.” This quote is from John Bogle’s 10 Rules of Investing.  A simple investment strategy with proper attention paid to liquidity needs, risk tolerance preferences and proper asset allocation can be much better than more complex expensive strategies.


Simply refer to these commandments every time you feel emotional or nervous about the market, you will save yourself a lot of time, worry, and money.