Saturday, January 24, 2009
Weekly Market Report

                                                                       

 

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