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January 2015

In January, the Barclays Municipal Bond Index rose 1.77 percent, while the Barclays 3-Year Municipal Bond Index rose 0.64 percent. The municipal market continued its impressive monthly winning streak, posting positive results for 13 months in a row.  Broadly speaking, fixed-income markets rallied in January as global growth fears mounted, deflation hit Europe and global inflation trended lower. The European Central Bank (ECB) announced a quantitative easing program in January in an attempt to revive growth. With global yields falling, U.S. fixed-income securities look very attractive on a global basis, including municipals.

U.S. economic data has generally been good but not great. Fourth-quarter real GDP advanced 2.6 percent, which is a slowdown compared to the last couple of quarters and was also below expectations. The employment report also showed consistent, steady gains with 252,000 nonfarm payrolls added in December. Housing is shaping up to be a bright spot in early 2015 with good results from housing starts and new home sales. Manufacturing indicators were more mixed in December as industrial production, durable goods orders and the ISM manufacturing composite index all disappointed or contracted. Retail sales in December also disappointed, falling 0.9 percent. This was surprising, given strong consumer confidence data and lower gasoline prices.

After winding down its quantitative easing program in October, the Federal Reserve has shifted its focus to normalizing interest rates. While the Fed is hinting that it might raise interest rates as soon as this summer, there remain numerous headwinds for the economy and the Fed might not be able to act on that timeline.

In specialty state trading, Texas and Ohio outperformed while Puerto Rico lagged. As a group, revenue bonds outperformed general obligation credits. Within the revenue universe, hospitals and transportation-backed bonds outperformed. High yield or “junk” bonds performed in-line with the broader muni market. Within the investment grade universe, lower-quality outperformed, but return differentials were narrow. AAA-rated credits underperformed BBB-rated bonds by 22 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 02/27/2015

Global Resources Fund PSPFX $6.28 -0.01 Gold and Precious Metals Fund USERX $5.78 0.08 World Precious Minerals Fund UNWPX $4.93 0.06 China Region Fund USCOX $8.31 -0.02 Emerging Europe Fund EUROX $6.52 -0.04 All American Equity Fund GBTFX $28.63 -0.02 Holmes Macro Trends Fund MEGAX $20.78 -0.17 Near-Term Tax Free Fund NEARX $2.25 -0.01 China Region Fund USCOX $8.31 -0.02