Market Commentary - 1st Quarter 2013:
Stocks resumed their climb over the wall of worry in
the first quarter. The Standard & Poor’s 500 index (S&P 500) rose
10% during the quarter, the strongest first quarter since 1998, to a
new all-time closing high. International market performance was
mixed. Japan was up nearly 12% as the Bank of Japan telegraphed a
plan to add massive amounts of liquidity to their markets.
Meanwhile, emerging markets as measured by the MSCI EM Index,
declined in price by roughly 2% as Brazil and China, two major EM
economies, suffered from renewed policy tightening measures. Europe
muddled its way to slightly positive returns as Cyprus became the
most recent European nation to get in over its head and require a
life-line from European policymakers.
First quarter stock strength was broad during the
quarter as all ten Standard & Poor’s sectors moved higher with seven
of the ten sectors turning in double-digit total returns. “Safe”
sectors outperformed as Health Care (+15.8%), Consumer Staples
(+14.6%) and Utilities (+13%) led the way higher while cyclical
sectors such as Materials and Technology brought up the rear
returning 4.8% and 4.6% respectively. Commodities, as measured by
the GSCI Commodities Index (+1.3%), underperformed thanks to a
nearly 5% decline in gold prices.
As seems like the case for an eternity, the economic
picture remains cloudy and the U.S. remains stuck in neutral. GDP
growth remains stubbornly low with most economists now penciling in
2% growth or less for 2013. The unemployment rate has improved
slightly, however many are pointing to the lowest labor
participation rate in a generation as the primary cause. A reduced
unemployment rate is welcomed, but a reduced rate because fewer
people are looking is clearly not a recipe for economic growth.
There are, however, some bright spots in the economy as new car
sales and housing starts have hit their highest levels since 2008.
Some of this rebound no doubt is being driven by a rebound in
household wealth thanks to the continued strength in the stock
Once again, higher risk securities outperformed in the
bond markets as investors continued to sacrifice credit quality for
yield. High yield bonds were the best performers in the fixed income
arena returning 2.9% while investment grade corporate bonds inched
up .05%. The benchmark 10-year U.S. Treasury yield rose slightly
during the first three months of the year and settled at 1.85% as
the quarter came to a close.
The U.S. economy continues to recover, albeit at an
alarmingly slow pace and we maintain our cautiously optimistic view
of the US stock market. At this point, the market as a whole appears
to be fairly valued, neither overly cheap nor expensive. Central
banks around the globe continue to provide the markets with a
tremendous amount of liquidity which has enabled stocks to keep
marching higher. At some point however stronger growth will become a
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 most investors to take a
balanced approach given the uncertain climate. Slow but steady
corporate earnings growth coupled with ongoing loose monetary policy
keeping interest rates low should continue to drive money away from
cash and into stocks.
As investors with a long term focus, we continue to
invest in companies with sound balance sheets, strong cash flow,
attractive business outlooks and relatively 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.
We welcome your comments or questions and thank you for
your continued confidence.
The Archer Team
Steven C. Demas
Troy C. Patton CPA/ABV
John W. Rosebrough CFA
You should carefully consider the
investment objectives, potential risks, management fees,
and charges and expenses of the Fund before investing.
The Fund's prospectus contains this and other
information about the Fund, and should be read carefully
before investing. You may obtain a current copy of the
Fund's prospectus by calling 800-238-7701 or by
downloading one online at
The Fund's past performance does not guarantee future
results. The investment return and principal value of an
investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or
less than their original cost. Current performance of
the Fund may be lower or higher than the performance
quoted. Performance data current to the most recent
month end may be obtained by calling 800-238-7701
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