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 9^th 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 2^nd quarter corporate earnings and the continuation of a contracting U.S. economy. Write to jim@campbellportfolios.com

                                                                       

 

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

 

                                                                       

 

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 4^th 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

 

                                                                       

 

Once again, the equity market ended the week in negative territory with stocks falling for the third consecutive week of the year. Positive earnings reports by Dow companies IBM and J&J failed to inspire the market as negative results from Bank of America GE, and Microsoft dominated Wall Street. Next week, the market should once again focus on quarterly earnings reports including Caterpillar, McDonalds, and Texas Instruments. We expect that earnings from majority of companies will continue to deteriorate as a deepening U.S. recession impacts earnings.

 

After a strong rally in December, the market continues to march toward its November 20^th lows. Since the beginning of the year, the S&P has declined an additional 7.9%. In contrast, the bond market continues to outperform stocks with the Barclays Aggregate Bond Index falling only 2.13%.

 

Within equities, we continue to focus on quality defensive stocks within the consumer staple and healthcare sectors. Many of these companies should continue to grow earnings despite the contracting U.S. economy. Due to low valuations, and piles of cash, we believe that many technology companies will also be able to deliver strong results.

 

We remained convinced that equities will ultimately recover sometime later this year or early in 2010, we expect fixed income investments will continue to outperform stocks. Despite a December rally in many sectors of the fixed income market, we believe tremendous value remains in both corporate and municipal bonds. Write to jim@campbellportfolios.com