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The U.S. markets were up for the week, with the NASDAQ up 1.61% for the week followed by the S&P 500 with 0.81% and 0.11% for the DJIA. So far, equity mutual funds have done very well year-to-date (YTD) and are seeing new highs. In addition, President Trump mentioned proposed tax cuts for corporate America several times, which should provide extra tailwind for equities.
Financials continues to be one of the top performing U.S. equity sectors, up 2.26% for the week and 16.50% YTD. Financials are up with looming speculation that the Trump administration will loosen regulations for the banking industry. In case you are wondering how to locate mutual funds that invest in the financial sector, look here.
International markets retreated, with the MSCI Developed index down 1.52% and the MSCI Emerging index down 0.52%. However, Japan’s NIKKEI index was not affected and was up 3.41%. The political changes that happened in the last few weeks in the U.S. did not have a positive impact on the international markets. Among the President’s proposed policy changes, alteration of the NAFTA trade agreement is of prime importance. This could directly affect countries like Mexico that are reliant on importing to America, as well as companies that outsource manufacturing for cheaper labor costs.
Energy was significantly up for the week, with the price of crude increasing $2.28 per barrel. Metals like gold and copper both showed negative returns, down -$15/troy ounce (-1.3%) and -$0.04/pound (-1.6%), respectively.
With the markets anticipating the Fed to raise interest rates next month, bond prices continue to fall. On similar grounds, equity investors are still weary of allocating funds into bond funds.
Yields for the 10-year and 30-year Treasuries grew 0.20 bps and 0.09 bps, respectively. On Thursday, Fed Chairman Janet Yellen indicated a rate hike soon. The market predicts there is a 98% probability that the Fed will raise interest rates in December. To learn how a portfolio should deal with an interest rate hike, read this article.
Like taxable bonds, the municipal markets saw bond prices decrease and yields increase with interest rates hikes looming in the near future.
The 10-year AAA bond yield increased by 0.34 bps and the 30-year AAA bond yield increased 0.29 bps from the week before. Muni bond mutual funds saw the largest outflow in three years of $3 billion. This shows that bond investors are reallocating to investments that will not be negatively affected by rising rates.
|Category||Subcategory||Avg Monthly %||Top Category Performer||Avg Monthly %||Performance Rationale|
|U.S. Equity Fund||Small Value||8.51%||SCAPX||15.75%||Total stock market has rallied since election results|
|International Equity||World Stock||-1.01%||CAMAX||6.35%||Fund has 1/3 invested in U.S., which has done well over last month. The remaining is invested in cash and international.|
|Commodities||Broad Basket||-3.52%||DBCMX||-0.11%||With commodities down for the month, the fund has been protected by staying in treasuries|
|Taxable Bonds||Bank Loan||-0.05%||CSHIX||0.59%||Anticipation of interest rates rising help floating rate funds, which are not affected|
|Municipal Bonds||Muni National Short||-0.81%||USMTX||0.14%||Bond funds with longer durations move to the ultra-short funds to protect them from interest rate fluctuations.|
This fund has seen a strong YTD performance, primarily by owning both the physical gold commodity and gold mining companies. Its second and third largest holdings are Fresnillo PLC and Newcrest Mining Ltd., which are both up over 55% on a YTD basis.
The following table provides the top performing mutual funds on a YTD basis, as of November 18, 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||Subcategory||YTD %||Net Expense Ratio||% of Assets in Top 5 Holdings||Total Assets $ (Millions)||Top Sector Invested|
|First Eagle Gold I||FEGIX||Precious Metals||Equity Precious Metals||39.50%||1.03%||37.04%||$ 1,028||Basic Materials|
|Hodges Institutional||HDPIX||Mid Cap Blend Equities||Mid Cap Blend Equities||36.10%||1.00%||25.50%||$ 306||Consumer Cyclical|
|Tortoise MLP & Pipeline Instl||TORIX||Master Limited Partnerships||Master Limited Partnerships||35.60%||0.99%||37.23%||$ 2,340||Energy|
|Deutsche Latin America Equity Instl||SLARX||International Equity||Latin America Stock||32.00%||1.67%||34.30%||$ 311||Consumer Defense|
|Morgan Stanley Inst Global Dscvry I||MLDIX||World Stock||Global Equities||30.10%||3.09%||40.87%||$ 20||Industrials|
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