Tuesday, August 31, 2010
Market Update

Asset Class
YTD
S&P 500
-4.53%
10 Year Treasury
   2.64%

August 30, 2010

                                          “How Low Can We Go”

The dramatic decline in interest rates over the past several weeks continues to baffle the majority of market participants. Although interest rates will ultimately climb, we expect Treasury yields will remain stubbornly low. Furthermore, we expect the unemployment rate will remain elevated for a number of years. In this environment, consumers will likely avoid new purchases, while companies will reluctantly hire new workers. Until the labor market improves, we expect both individual and institutional investors will avoid stocks, and interest rates will continue to fall.

The Friday rebound in stocks failed to reverse the market losses for the week. As the equity markets fell for the 3rd week in a row, Treasury prices continued to climb higher. Despite the current interest rate environment, we continue to uncover value in select fixed income offerings. During the week, we purchased a new Build America Bond issue yielding around 7 percent. This specific Build America Bond was an “Economic Recovery Zone Bond” which receives a direct Federal interest subsidy of 45%.

In summary, we remain convinced that the recent contraction in the U.S. economy will ultimately create the environment necessary for more robust economic growth. More importantly, stocks will likely follow the economy and will muddle along for an extended period of time. In this period of slow economic activity, investors should continue to ask: “How Low Can We Go?” We suggest that contrary to market expectations, interest rates will fall surprisingly lower.

Write to jim@campbellportfolios.com

 

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Monday, August 23, 2010
Market Update

Asset Class
YTD
S&P 500
-3.90%
10 Year Treasury
   2.61%

August 23rd, 2010

                                           “Double Dippin”

On a recent trip to my children’s favorite ice cream shop, Avery who is my oldest daughter asked, “Daddy can I have a double dip?”  I responded, “Yes, I guess your Mom probably wouldn’t mind.” Will the slowing recovery and current economic uncertainty tip the U.S. into a double dip? We suggest that whether we actually experience the technical definition of a double dip recession is immaterial; the recent data confirms the recovery is faltering. More importantly, the economy will likely stumble along for an extended period of time.

During the week, several high profile acquisitions failed to lift the market as stocks fell for the second week in a row. After the recent market pullback, the S&P 500 is once again negative for the year. Stock valuations are becoming more attractive; however the market should continue to struggle against the headwinds of a slowing economy. In response to the latest unemployment data, bond yields resumed their unprecedented move lower with the yield on the 10 year Treasury falling to a rate of only 2.61%.

After several weeks on the sidelines, we made several new purchases for our client portfolios including a new issue Economic Recovery Zone Bond. We also participated in the secondary MLP offering for Energy Transfer Partners, a natural gas pipeline company. Despite the current low interest rate environment, we believe significant value remains in many sectors of the corporate and municipal bond market. Furthermore, we expect investors will continue to seek the stability and income associated with bonds.

In summary, we remain confident that the current low interest rate environment and a determined Federal Reserve will ultimately create the environment necessary for stronger economic growth.  In the near term, we are unlikely to experience robust economic growth and a better environment for stocks until the labor market improves. We believe that the economy won’t experience a double dip; however I will join my daughter and have a double dip of rocky road.

Write to jim@campbellportfolios.com

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Friday, June 26, 2009
Market Update

Campbell Market Update
                                   
Asset Class Performance
YTD
S&P 500
                             1.9%
Lehman Aggregate Bond Index
                         *0.12%
Data WSJ as of June 25, 2009; *March 31, 2009
 
Jim Campbell
June 26, 2009
 
How far will stocks pullback?
 
After Thursday’s 2.1% rally in the S&P 500, the stock market once again has turned positive for the year. Despite the tremendous rally since the March 9th lows, stocks remain stuck at the same levels as early May.  Hidden in this week’s stock market rally, Treasury and mortgage bonds resumed their recent uptrend. This rally has been a direct result of the unprecedented response to recent Treasury auctions and the continuation of deflationary pressures in the U.S. economy.  More importantly, the gains in high quality corporate, mortgage, and Treasury bonds have added significant gains in our client’s bond portfolios.
 
Currently, we continue to remain positive on high quality bonds especially municipals. Within the equity market, stocks in the basic material, financial, consumer discretionary, and energy sectors continue to lead the market rally. However, we continue to suggest that high quality defensive companies will likely outperform the market for the remainder of the year.  In addition to consumer staples, we have recently become more positive on the utility sector.  Furthermore, we will use future market corrections to add to our client’s consumer staple holdings and initiate new purchases within the utility sector. In addition, we expect Washington’s current healthcare debate will likely climax later this summer creating tremendous opportunities in the healthcare sector.
 
In the municipal market, taxable municipal bonds remain quite attractive.  Within this sector the best values remain in longer maturity “Build America Bonds” which currently offer yields between 6% and 7%. In summary, we expect that the stock market will likely experience a considerable pullback or will continue to move sideways throughout the summer. A potential catalyst, for this correction could be 2nd quarter corporate earnings and the continuation of a contracting U.S. economy. Write to jim@campbellportfolios.com

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Saturday, February 07, 2009
Weekly Market Report

 
Weekly Market Report
 
                                                                       
Asset Class Performance
YTD
S&P 500
-3.8%
Lehman Aggregate Bond Index
    2.19%
 
Market Outlook
February 7, 2009
 
After Friday’s 2.7% rally, stocks rose for the first week of the year. With the week’s spectacular 5.2% gain, the S&P trimmed its losses to 3.8% for the year. Stocks were able to overcome a number of negative earnings reports including earnings from Costco, Disney, and UPS. Surprisingly, the market also managed to rally despite horrible data from the U.S. Labor Department which reported an additional loss of 598,000 jobs in January. Due to continued economic weakness and a 7.6% unemployment rate, an economic recovery in 2009 appears to be quite remote. Friday’s jobs reports did appear to rally new support in Congress to complete the stimulus package which should pass sometime next week.
 
Ironically, the jobs report failed to support the government bond market which resumed its recent sell off. In response to the last weeks market recovery; the 10 year Treasury was particularly weak sending its yield to 2.98%. Despite the significant rise in interest rates, we continue to believe Treasuries remain overvalued. Today, we appear to be in a period of significant deflation; however the unprecedented level of government intervention will ultimately lead to higher inflation and interest rates.
 
Next week, the market’s attention should likely remain focused on Washington where Congress will attempt to complete the stimulus bill. Stocks should resume its recent rally; however we expect that stocks will later succumb to worsening U.S. economy. The latest market recovery has not deterred our expectation that stocks will continue to remain under pressure through 2009. Furthermore, a lasting market recovery will likely take time to materialize. Within the equity market, positive earnings growth from the defensive consumer staple and healthcare sectors should eventually be rewarded by the market. More importantly, we remain convinced that investors will increasingly seek the safety of the fixed income market, and bonds should continue to outperform. Within the bond market, we continue to find the greatest values in corporate and municipal bonds. Write to jim@campbellportfolios.com
 
Campbell Asset Management, LLC is fee only registered investment advisor (RIA), registered with the Securities Exchange Commission.

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Saturday, January 31, 2009
Weekly Market Report

 
Weekly Market Report
 
                                                                       
Asset Class Performance
YTD
S&P 500
-8.60%
Lehman Aggregate Bond Index
 2.87%
 
Market Outlook
January 31,  2008
 
After Friday’s market sell off, stocks fell for the fourth consecutive week, and declined 8.6% for the month. During the week, negative earnings reports from blue-chip companies Boeing, Caterpillar, and Proctor & Gamble led to market declines. Additional job losses including 10,000 positions at Boeing and a staggering 20,000 jobs at Caterpillar led to a significant decline in investor sentiment. As the economy continues to stumble, company earnings will continue to plummet, and companies will continue to cut cost primarily by slashing jobs.
 
On Thursday, the Commerce Department reported fourth quarter GDP fell to an annualized rate of 3.8 percent. This contraction in the U.S. economy was the worst since the recession of 1982. Hidden within the market pessimism inflation continues to fall with the CPI falling 5.8% during the 4th quarter.
 
Next week, the market’s attention will move to Washington where the Congress continues to debate the size and scope of the stimulus package. Although, Democrats and Republicans will likely continue to spar, we believe a stimulus package will ultimately be passed in the next several weeks.
 
Despite the dramatic correction in stocks, we remain convinced that a lasting market recovery will take time. We also expect investors increasingly seek safety, and bonds will continue to outperform stocks. Within the fixed income market, we continue to find the greatest values in corporate and municipal bonds. Write to jim@campbellportfolios.com
 
Campbell Asset Management, LLC is fee only registered investment advisor (RIA), registered with the Securities Exchange Commission.

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