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August 2014

In August, the Near-Term Tax Free Fund rose 0.62 percent, while the benchmark Barclay’s 3-Year Municipal Bond Index rose 0.24 percent. The Barclay’s Municipal Bond Index rose 1.21 percent for the month. The returns in the municipal market were robust in August, continuing a winning streak for fixed income generally, and municipals specifically.  See complete fund performance here.

Fixed-income markets rallied in August as the European Central Bank (ECB) unexpectedly lowered interest rates and provided a roadmap for roughly $1 trillion in quantitative easing (QE) over the next two years. With global yields falling, U.S. fixed-income securities look attractive, which includes municipals.

U.S. economic data has generally been better than expected. Second-quarter real GDP was higher, revised to 4.2 percent. The employment report continues to show consistent, steady gains with 209,000 nonfarm payrolls added in July. Consumer confidence continues to hit multi-year highs and is at the highest level since late 2007. Housing indicators continue to be mixed but overall were net positive in August. New home sales fell 2.4 percent in July, but housing starts and building permits were robust rising 15.7 percent and 8.1 percent, respectively. Housing activity has disappointed since the Federal Reserve’s QE taper announcement more than a year ago due to a combination of higher mortgage rates and higher housing prices.

The Fed tapered its QE program by an additional $10 billion during the late-July Federal Open Markets Committee meeting, and is expected to exit the program by the end of October. The Fed appears committed to taper unless economic data deteriorates significantly. To balance the risk to the economy, the Fed remains committed to an ultra-low Fed Funds rate as long as needed. The current consensus forecast is for an interest rate hike in mid-2015.

In specialty-state trading, for the second month in a row returns were uniform except for Puerto Rico and other U.S. territories which outperformed; this trend has been in place for several months now. Puerto Rico municipals rose 2.50 percent in August after falling 5.41 in July on concern that recently passed legislation in Puerto Rico would allow for some of the commonwealth’s agencies to default. Other territories rallied on Puerto Rico’s woes as they carry the same triple-tax exemption and are currently viewed as better credits. As a group, revenue bonds outperformed general obligation credits. Within the revenue universe, hospitals, transportation and industrial development-backed bonds outperformed. High yield or “junk” bonds were strong, rising 3.13 percent. Within the investment grade universe, lower quality outperformed, as AAA-rated credits underperformed BBB-rated bonds by 16 basis points.

Past performance does not guarantee future results.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local income taxes, and if applicable, may subject certain investors to the Alternative Minimum Tax as well. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes. The Near-Term Tax Free Fund may be exposed to risks related to a concentration of investments in a particular state or geographic area. These investments present risks resulting from changes in economic conditions of the region or issuer.

Net Asset Value
as of 09/29/2014

Global Resources Fund PSPFX $9.11 -0.01 Gold and Precious Metals Fund USERX $6.26 -0.04 World Precious Minerals Fund UNWPX $5.90 -0.02 China Region Fund USCOX $7.83 -0.18 Emerging Europe Fund EUROX $7.51 -0.03 All American Equity Fund GBTFX $32.98 -0.09 Holmes Macro Trends Fund MEGAX $23.80 0.01 Near-Term Tax Free Fund NEARX $2.26 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change