Blog Archive for January 2009

                                                                       

 

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