Third Quarter 2018

For the third quarter, the Barclays Municipal 3-Year Bond Index returned  negative 0.12 percent, while the Near-Term Tax Free Fund returned  negative 0.17 percent. See complete fund performance here.

Past performance does not guarantee future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.

Municipal bonds fell short of their taxable peers in the third quarter due to more-than-expected supply coming to the secondary market. Rates trended higher and a significant cut in corporate tax rates caused some of the larger participants in the municipal market, banks and insurance companies, to cut back their allocation to tax-exempt bonds.

As expected, the Federal Reserve raised the federal funds rate by a quarter point to a target range of between 2.00 and 2.25 percent in September. With three rate hikes from the Fed thus far this year, the Federal Open Markets Committee (FOMC) expects one more rate increase in 2018 and three more in 2019. Noting the strength of the U.S. economy, and inflation near the 2 percent target, the Fed removed language that interest rate policy would remain “accommodative.”

Standard & Poor’s released a September 2018 report in which it subjected state financial operations to the stresses of moderate and severe recessions, and then compared 2018 reserves to expected drawdowns. Only 20 states had reserves sufficient to cover loss of revenue and increased social service spending during a moderate recession, and overall the states showed an average revenue shortfall of 9.9 percent. S&P went further and made adjustments for dependence on more cyclical revenue streams, level of social-service spending and fixed costs, including pensions. After the adjustments, 14 states were considered low-risk, 21 moderate and 14 elevated. S&P contends, however, that states have the capacity to make fiscal adjustments in response to a downturn. S&P also notes, though, that there were 19 state downgrades from the beginning of 2016 through August 2018, compared with just four upgrades, and it observes that this ratio is abnormal this far into a recovery. The downgrades could reflect increased reliance on income taxes, eroding tax bases, rising entitlement costs and liability growth.

Nonetheless, strong economic expansion has put many states in good financial condition heading into financial year 2019, which for many began on July 1. Better-than-expected tax collections, coupled with many states beginning the year with surpluses, generated multiple rating/outlook affirmations and revisions including California, Illinois, Alabama, Louisiana, Massachusetts, New Jersey and Wisconsin.


The Barclays 3-Year Municipal Bond Index is a total return benchmark designed for short-term municipal assets. The index includes bonds with a minimum credit rating BAA3, are issued as part of a deal of at least $50 million, have an amount outstanding of at least $5 million and have a maturity of 2 to 4 years.

Net Asset Value
as of 03/21/2019

Global Resources Fund PSPFX $4.58 0.02 Gold and Precious Metals Fund USERX $7.52 -0.01 World Precious Minerals Fund UNWPX $2.83 -0.01 China Region Fund USCOX $8.69 0.10 Emerging Europe Fund EUROX $6.75 -0.01 All American Equity Fund GBTFX $23.91 0.19 Holmes Macro Trends Fund MEGAX $17.01 0.18 Near-Term Tax Free Fund NEARX $2.20 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change