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October 2014

In October, the Near-Term Tax Free Fund rose 0.58 percent, while the benchmark Barclay’s 3-Year Municipal Bond Index rose 0.11 percent. The Barclay’s Municipal Bond Index rose 0.69 percent for the month. Returns in the municipal market were robust in October, continuing a winning streak for fixed income generally, and municipals specifically that has lasted all year.   See complete fund performance here.

Fixed-income markets rallied in October as European growth remained weak. Fears of poor results from European bank stress tests drove the market higher this month. Even though the European Central Bank (ECB) has taken action in recent months, the perception is that deflation is around the corner and the ECB isn’t moving fast enough to avert it. With global yields falling, U.S. fixed-income securities look attractive, including municipals.

U.S. economic data has generally been better than expected. Third-quarter real GDP grew faster than expected to 3.5 percent. The employment report showed consistent, steady gains with 248,000 nonfarm payrolls added in September. Housing indicators were better with housing starts, building permits and new home sales all rising for the month of September. Manufacturing indicators were mixed as the ISM Manufacturing Index fell from a three-year high in August, but still remains at a very robust level. Industrial production rose 1 percent after a small decline in August. Retail sales for September disappointed, falling 0.3 percent even as consumer confidence rose to a new high in October.

The Federal Reserve completed the gradual reduction of its quantitative easing (QE) program at the end of October. The Fed remains committed to an ultra-low Fed Funds rate as long as needed, and with weak economic performance out of Europe along with a strong U.S. dollar acting as a governor on future U.S. growth, the Fed may not be in a position to act as quickly as the market expects. The current consensus forecast is for an interest rate hike in mid-2015.

In specialty-state trading, returns were uniform except for Puerto Rico which underperformed, while other U.S. territories such as Guam outperformed. Other U.S. territories have rallied on Puerto Rico’s woes as they carry the same triple-tax exemption and are viewed as better credits in the current environment. As a group, revenue bonds outperformed general-obligation credits. Within the revenue universe, hospitals, housing and transportation-backed bonds outperformed. High yield or “junk” bonds were weak, falling 0.36 percent. Within the investment-grade universe, lower quality outperformed, as AAA-rated credits underperformed BBB-rated bonds by 38 basis points.

Past performance does not guarantee future results.

The Barclays Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market. 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. The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states.

Net Asset Value
as of 11/21/2014

Global Resources Fund PSPFX $8.37 0.20 Gold and Precious Metals Fund USERX $5.68 0.08 World Precious Minerals Fund UNWPX $5.11 0.08 China Region Fund USCOX $8.08 0.07 Emerging Europe Fund EUROX $7.40 0.03 All American Equity Fund GBTFX $33.25 0.15 Holmes Macro Trends Fund MEGAX $23.28 0.05 Near-Term Tax Free Fund NEARX $2.26 No Change China Region Fund USCOX $8.08 0.07