- 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.
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|
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