Third Quarter 2016

For the quarter, the Barclays U.S. Treasury Bills 6-9 Months Index returned 0.08 percent, while the U.S. Government Securities Ultra-Short Bond Fund returned 0.10 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.

The month of September was dominated by central bank meetings as the Federal Reserve, Bank of Japan, European Central Bank and the Bank of England all held policy meetings. It is important to note that the sentiment around September's meetings was a bit different than in past years, as the market has started to question the efficacy of further central bank easing. Judging by Treasury market price action, the aggregate of global central bank action for September left the market wanting as Treasury yields finished lower on the month. If the market starts to lose faith in the ability of central banks to generate growth and inflation, all eyes will continue to look toward fiscal policy, which has been nonexistent globally in the aftermath of the Great Recession.

The release of the September statement showed a Fed that hopes a tightening could be warranted in December. It was apparent from the release of the staff economic projections that hiking aspirations for 2017 and beyond are significantly more tepid than they were previously. The staff's forecasts for the federal funds rate now calls for one rate hike in 2016 (down from two before), two hikes in 2017 (down from three before) and three hikes in 2018 (same as before). Importantly, the longer-run projection was trimmed to 2.875 percent. The reduction to the longer-run projection in part reflects the fact that longer-run real GDP growth was also revised down to 1.8 percent from 2 percent. These downward revisions to both funds rate forecasts and growth suggest that the notion that monetary policy is less accommodative at current levels than previously thought is beginning to take hold inside the Federal Reserve Open Market Committee (FOMC).

Despite kicking off her post-meeting press conference by characterizing herself as "generally pleased with how the economy is doing," Chair Janet Yellen did not seem eager to commit the path of policy in either direction at this point. In her view, "Since monetary policy is only modestly accommodative, there is only little risk of falling behind the curve in the future and gradual increases in the federal funds rate will likely be sufficient to get to a neutral policy stance over the next few years." However, she did indicate that she would be open to a tightening later this year, insisting that the decision not to raise rates at the September meeting "does not reflect a lack of confidence in the economy." The notion that the FOMC's decision to defer any further tightening does not reflect a lack of confidence in the economy is a bit odd, especially considering the FOMC staff projections show a meager 1.9 percent year-over-year growth figure over the next three years. The notion that growth can remain low while the policy rate moves significantly higher may eventually prove to be unfounded, but at the moment, the FOMC seems intent to continue applying its pre-2008 framework to 2016's issues.

The Barclays U.S. Treasury Bills 6-9 Months Total Return Index tracks the performance of U.S. Treasury Bills with a maturity of six to nine months.

Net Asset Value
as of 01/18/2017

Global Resources Fund PSPFX $5.52 -0.07 Gold and Precious Metals Fund USERX $7.87 -0.21 World Precious Minerals Fund UNWPX $6.95 -0.19 China Region Fund USCOX $7.70 0.08 Emerging Europe Fund EUROX $5.98 -0.02 All American Equity Fund GBTFX $23.75 0.09 Holmes Macro Trends Fund MEGAX $18.71 0.02 Near-Term Tax Free Fund NEARX $2.22 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change