To our clients:


Below are 2nd Quarter 2012 Investment Performance Comments written by the Archer portfolio managers summarizing the investment market activity for the 2nd Quarter.  For our investment clients that invest through us using Archer Investments, you will see the results of the description below in your accounts. If you would like a Morningstar Report for June 30, 2012 for your portfolios or funds, please call us.

In addition, below are the year-to-date (July) model portfolio performance results.
 

    Model

YTD

    Aggressive 5.23%
    Moderate Aggressive 5.72%
    Moderate 4.96%
    Income & Growth 5.51%
    Conservative 5.28%


Many of you are invested in the portfolios.  If you would like to discuss your
individual account or your situation or receive more information, feel free to call me at 240 316-3564 or email at kgrow@esullivan.net

 

Kathy

 

Kathleen F. Grow, IAR, EA

Financial Advisor and Tax Professional

 

Registered Investment Advisor (RIA) through Archer Investment Corporation.


Direct Dial (240) 316-3564 | Phone (301) 657-8080 Ext 135 | Fax (301) 657-9055
Website:
www.esullivan.net | E-mail: kgrow@esullivan.net
 

 

 



2nd Quarter 2012

After an impressive start to the year, volatility returned to the equity markets in force during the second quarter. The Standard & Poor’s 500 index fell 3.3% for the quarter as a late June rally eased some of the pain from May’s 6% decline. International stocks, small company stocks and commodities all underperformed the benchmark S&P 500 as renewed concerns about Euro-area debt and global growth weighed on investor risk appetite. In a reversal from the first quarter, historically defensive sectors outperformed as telecommunications stocks (+12.6%) and utilities (+5.5%) were the best performers while financial, technology, and energy companies declined 6-7% during the quarter.

The sharp decline in May was initially sparked by the first Greek election and renewed investor fears of an imminent break-up of the European Monetary Union. Sentiment received a boost to end the quarter as European leaders agreed on a number of measures which would lay the groundwork for bank re-capitalizations and a more centralized banking regulator.

U.S. economic sentiment seemed to turn on a dime as manufacturing surveys turned negative and a number of high profile companies notified investors of poorer growth outlooks. Tight austerity programs in Europe have very likely resulted in recession in a number of countries and the weak manufacturing and persistently soft jobs market have reignited talk of a U.S. recession.

Bond yields continued to decline as the benchmark 10-year U.S. Treasury closed the quarter yielding approximately 1.6%. Domestic bond prices climbed nearly across the board (bond prices and yields move inversely). Government bonds rallied as many investors sought out the relative safety of the U.S. Treasury market and lower rated corporate bonds gained as other investors stretched for income.

At the close of the quarter, sentiment can best be described as cautiously optimistic. European leaders provided some hope that they will be able to contain their debt crisis. Likewise, some positives began to emerge domestically. Lower commodity prices and an improving housing market are providing some relief to consumers. “Homeowner’s equity grew at its fastest pace in fifty years, eliminating the previous drag from the negative wealth effect” according to BCA Research.

Overall, we would count ourselves as being in the cautiously optimistic camp. The U.S. economy continues to recover, albeit at a painfully slow pace. It appears to us that the leaders across the pond are finally beginning to take the necessary steps to contain their debt crises and allow the European financial sector to heal. While we believe that many of the aforementioned concerns are largely priced into the market, we are well aware that in the current environment the market will be more susceptible to outside shocks and “headline risk.” The impending elections, the well publicized fiscal cliff, and the situation in Europe will likely continue to add to volatility until the resolution of each becomes clearer. Reasonable stock valuations, extremely accommodative monetary policy around the globe and relatively balanced sentiment are supportive.

As investors with a long term focus, we continue to invest in companies with sound balance sheets, strong cash flow, attractive business outlooks and inexpensive valuations. Within the fixed income markets we remain selective and take advantage of opportunities when they present themselves by focusing on both the return of and the return on principal. Based on current valuations, we continue to view equities as relatively more attractive than bonds for a long-term investor, but we believe it is prudent for investors to take a balanced approach given the uncertain climate.

We welcome your comments or questions and thank you for your continued confidence.


Archer Investment Corporation
Steven C. Demas
Troy C. Patton CPA/ABV
John W. Rosebrough CFA
Portfolio Managers

 

 
 

Sullivan & Company | Certified Public Accountants | 4709 Montgomery Lane #201 | Bethesda, MD, 20814 | 301-657-8080