Saturday, January 31, 2009
Weekly Market Report

                                                                       

 

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