- U.S. markets hit the skids as post-election rally finally loses steam and causes declines in both S&P and NASDAQ.
- With OPEC agreeing to cut production for first time in 8 years, energy prices, especially oil, skyrocket.
- Municipal bond funds continue to see large outflows, with fearful investors moving to other asset classes that won’t be affected by interest rates.
- Make sure to check out last week’s edition of the Weekly Roundup to get the whole picture.
Market Wrap-Up
Energy was the best returning sector, up 2.64% for the week and 25.43% for the year. In an unexpected move, OPEC decided to cut oil production for the first time in 8 years, causing energy prices to soar. Explore mutual funds that invest in the energy sector.
International Equity – International markets remained relatively flat, with the MSCI Developed Index down 0.22% and the MSCI Emerging Index down 0.29%. However, Japan’s NIKKEI Index was up 0.24%.
Commodities – Energy was the week’s best performer, with the price of crude increasing $5.62 per barrel or 11.49% due to the positive output of the OPEC meeting. Metals like gold and copper both showed relatively flat returns, down -$3/troy ounce (-0.25%) and -$0.04/pound (-1.51%), respectively.
Be sure to check our tips on how to invest in the right commodity-based mutual fund.
Taxable Bonds – With the market estimating that the Fed has an almost 100% chance of raising rates in the next few weeks, Treasury yields, barring the 2-year maturities, rose last week.
Yields for the 10-year and 30-year Treasuries grew 0.04 bps and 0.07 bps, respectively. Throughout the week, Fed regional leaders Dudley, Kaplan, Powell and Mester indicated that the economy is showing strong enough momentum for a December rate hike. Learn how to rebalance your portfolio based on interest rate hikes.
Municipal Bonds – The municipal markets saw bond prices decrease even more than taxables, causing yields to skyrocket with interest rate hikes looming in the near future.
The 10-year AAA bond yield increased by 18 bps and the 30-year AAA bond yield increased 20 bps from the week before. Municipal fund flows continued the massive outflow trend for the third straight week, with just over $2 billion for the week and over $7 billion for the month of November. This shows that bond investors are reallocating to investments that will not be negatively affected by rising rates.
Performance Snapshot: Top Fund Category
| Category | Top Subcategory | MTD Subcategory Return (%) | Top Subcategory Performer | MTD Fund Return (%) | Performance Rationale |
|---|---|---|---|---|---|
| U.S. Equity Fund | Small Value | 14.10% | CMOVX | 24.76% | Small Value continues to rally with the total market. This fund has 23% in Energy, which had a very big week, up 2.64% |
| International Equity | World Stock | 1.36% | CAMAX | 9.55% | Fund has 1/3 invested in the U.S., which has done well over last month. The remaining is invested in cash and international markets. |
| Commodities | Broad Basket | 3.48% | DBCMX | 7.90% | With commodities down for the month, the fund has been protected by staying in Treasuries. |
| Taxable Bonds | Bank Loan | 0.58% | HFRZX | 1.29% | Fund invests in floating rate securities, which rise as interest rates rise. |
| Municipal Bonds | Muni National Short | -1.54% | TFCAX | 0.03% | With ¼ invested in cash and the rest in shorter term issues, this fund is sheltered from interest rates. |
Performance Snapshot: Top Fund
This fund has seen a strong YTD performance, primarily by having nearly 13% invested in the energy sector, which is up over 25% for the year. The top holding is Texas Pacific Land Trust (TPL), which is up over 126% for the year.
The following table provides the top performing mutual funds on a YTD basis, as of December 2, 2016. Only those funds that are rated 5 stars by Morningstar and that generated YTD return greater than that achieved by the S&P 500 are included.
| Name | Ticker | Category | YTD % | Net Expense Ratio | % of Assets in Top 5 Holdings | Total Assets $ (Millions) | Top Sector Invested |
|---|---|---|---|---|---|---|---|
| Hodges Institutional | HDPIX | Mid Cap Blend Equities | 40.14% | 1.00% | 28.05% | $ 306 | Consumer Cyclical |
| First Eagle Gold I | FEGIX | Precious Metals | 39.74% | 1.03% | 40.49% | $ 1,028 | Basic Materials |
| Wadell & Reed Energy Y | WEGYX | Energy | 38.87% | 1.10% | 22.42% | $ 243 | Energy |
| Williston Basin/Mid-North America Stk A | ICPAX | Energy | 38.05% | 1.44% | 22.61% | $ 601 | Energy |
| Tortoise MLP & Pipeline Instl | TORIX | Master Limited Partnerships | 35.67% | 0.99% | 37.23% | $ 2,340 | Energy |