Blog Archive for June 2009

                                   

 

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