Rate Hike Ahead? Here’s How to Get Your Portfolio Ready
Many experts and analysts believe a June rate hike seems very unlikely, but today, Federal Reserve Chairwoman Janet Yellen hinted that one might happen as soon as the end of this year.
By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors
Many experts and analysts believe a June rate hike seems very unlikely, but today, Federal Reserve Chairwoman Janet Yellen hinted that one might happen as soon as the end of this year:
“If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy.”
In light of this possibility, the question on investors’ minds should be: “How should I prep my portfolio?”
To answer that, we first need to discuss core investing.
The definition of a core holding changes slightly depending on a person’s investment goals, but generally speaking, it’s a fund or other type of security that represents the principal foundation of a portfolio, one that requires little, if any, adjustments over the long-term. In other words, it behaves pretty predictably in a variety of economic climates.
Such securities tend to be conservative and a little “boring.” Think of them as a plain ham sandwich: What it lacks in flavor, it makes up for in keeping you going during the day. Savvy investors take full advantage of core holdings because they’ve historically provided stability and peace of mind. Examples might include large-cap, dividend-paying value stocks or short-term municipal bonds.
Regular readers of Investor Alert and Frank Talk have no doubt already seen a version of the following chart, but it’s worth sharing again to illustrate the importance of having a reliable core holding. Whereas the S&P 500 Index twice fell 40 percent last decade, our Near-Term Tax Free Fund (NEARX) remained stable and ticked higher. Had you invested $100,000 in both an S&P 500 fund and NEARX in December 2000, it would have taken roughly 14 years for the equity fund’s growth to catch up with and exceed that of NEARX.
An investment in S&P 500 stocks has its place in most portfolios, of course, but think of NEARX as the stabilizer in times of extreme gains and losses such as we saw between 2000 and 2009.
It’s important to keep in mind, though, that the last decade was unique. We saw some serious market-rattling events—the dotcom bubble, 9/11 and the worst economic crisis since the Great Depression.
There will also be times when the equities market greatly outperforms the muni market. Take now, for instance. We’re in year six of one of the most durable bull runs in U.S. history.
This is what makes NEARX such an attractive core investment. Compared to the equities market, it displayed nowhere near the same amount of volatility in either good times or bad. It continued to climb and deliver positive returns, regardless of what the equities market was doing.
The Short End of the Curve
Today the Bureau of Labor Statistics reported that the consumer price index (CPI), less food and energy, rose 0.3 percent in April. This, along with an improved jobs market, is exactly what the Fed was seeking to justify raising rates.
Investors need to be aware that interest rates and bond prices have an inverse relationship. When one rises, the other falls, and vice versa.
But that’s only part of the story. The longer a bond’s maturity, the greater its interest rate sensitivity; put another way, bonds that are more sensitive to changes in the interest rate environment will have greater price fluctuations than those with less sensitivity.
This means that in these times of uncertainty over when rates will rise, prudent investors should consider positioning their portfolios to focus on shorter average maturities, which have demonstrated less volatility than bonds with longer average maturities.
As you can see below in the hypothetical example using a two-year, 10-year and 30-year Treasury, the further out the maturity date and higher the rate hike, the more your security would be affected. These are Treasuries, not municipal bonds, but munis could be similarly affected.
NEARX holds four stars overall from Morningstar, among 179 Municipal National Short-Term funds as of 3/31/2015, based on risk-adjusted return.
It’s also delivered over 20 years of positive returns.
This is a rare achievement indeed.
So rare, in fact, that out of 25,000 equity and bond funds, only 30 have accomplished the same feat of delivering positive returns for 20 straight years, according to Lipper. As such, NEARX enjoys one of the most envied track records among its peers.
Before I leave you, on behalf of everyone at U.S. Global Investors, I wish to thank all of the brave men and women who served and continue to serve this great country. Your bravery, dedication and sacrifice will always be remembered. Happy Memorial Day!
Explore our Near-Term Tax Free Fund investment cases!
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|Fund||One-Year||Five-Year||Ten-Year||Gross Expense Ratio||Expense Cap|
|Near-Term Tax Free Fund (NEARX)||2.38%||2.59%||3.10%||1.08%||0.45%|
|S&P 500 Index||12.73%||14.47%||8.01%||N/A||N/A|
Expense ratio as stated in the most recent prospectus. The expense cap is a contractual limit through April 30, 2016, for the Near-Term Tax Free Fund, on total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest). Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. 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. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.
Morningstar ratings based on risk-adjusted return and number of funds
Category: Municipal National Short-term funds
Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)
- The major market indices finished lower this week. The Dow Jones Industrial Average fell 0.22 percent. The S&P 500 Stock Index rose 0.16 percent, while the Nasdaq Composite rose 0.81 percent. The Russell 2000 small capitalization index rose 0.67 percent this week.
- The Hang Seng Composite gained 0.23 percent this week; while Taiwan gained 0.62 percent and the KOSPI gained 1.88 percent.
- The 10-year Treasury bond yield gained .06 basis points to 2.21 percent.
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Domestic Equity Market
- Health care stocks continue to outperform as the sector remains a relatively safer domestic play given the current uncertain economic climate. The S&P 500 Health Care Index rose 0.86 percent this week.
- Financials was the third best performing sector this week, gaining momentum from a steeper yield curve after 10-year yields jumped to 2.20 percent. The S&P 500 Financials Index rose 0.51 percent this week.
- Core consumer prices rose 0.3 percent from March to April, according to official data released on Friday. The stronger-than-expected inflation reading is supportive of the idea that we are in a growing reflationary economy.
- This week the Markit U.S. Manufacturing purchasing managers’ index (PMI) came in weaker than expected. Whereas analysts expected a reading of 54.5, the actual reading was only 53.8.
- Existing home sales fell for the month of April, underwhelming expectations. Home sales have yet to gain momentum during the recovery, which looks particularly concerning.
- The Federal Reserve along with Fed Chairwoman Janet Yellen highlighted the improving inflation figures this week, stating that they foresee an interest rate increase later this year. Although this is a positive indication that they feel the economy is strong enough to handle a rate increase, such an announcement will negatively affect equities.
- The Michigan Consumer Sentiment Index data will be released next week. Since many analysts are wondering where the U.S. consumer has gone, the release of this key data point will be significant to watch in relation to retail plays.
- The leading economic index, a measure of future economic conditions, is expected to increase 0.7 percent for the month of April. A higher leading index is a positive sign for the broader U.S. market.
- Utilities continue to remain cheap relative to the broader market and also have higher yields than the 10-year U.S. government note. For more risk-averse investors, now could be a great opportunity to pick up high-yield stocks.
- Economic growth for the first quarter of 2015 will be released next week. With analysts expecting a contraction of 0.9 percent, more cyclical areas are susceptible to a pullback.
- While many analysts continue to mention the U.S. Dollar Index (DXY) in isolation, its volatility and recent appreciation has been tightly linked to the cross rate between the euro and the dollar, the largest weighting in the index. Arguably, the euro side of the cross is more important at the moment, and with quantitative easing (QE) underway the euro has the potential to depreciate further.
- The energy sector continues to underperform the broader market, despite the recent rally in crude oil prices. For many investors this begs the question, where is the energy rally?
The Economy and Bond Market
Global stocks rose broadly but modestly this week as investors reacted favorably to the U.S. Federal Reserve’s release of its April policy meeting minutes. The minutes indicated a reluctance to raise interest rates at the next meeting as the U.S. economy needs to strengthen further. Japan reported a pickup in first-quarter economic growth, but China showed continued weakness. Yields on 10-year U.S. Treasury notes remained around 2.2 percent. The euro fell in value versus the dollar, ending close to $1.10 on Friday.
- The Census Bureau surprised the market this week with the strongest monthly report for housing starts and permits in seven-and-a-half years. Housing starts soared 20.2 percent in April to a much higher-than-expected annual rate of 1.135 million, and with permits up 10.1 percent to a much higher-than-expected 1.143 million. Single-family housing starts in April were up 16.7 percent from March, and up 15 percent from April 2014.
- Consumer price index (CPI) data for April inched up 0.1 percent month-over-month, while core CPI added a stronger 0.3 percent month-over-month. The gain in core CPI was the biggest since January 2013.
- Suggesting that the paltry economic growth in the first quarter may be temporary, the Conference Board Leading Economic Index rose by much more than anticipated in April. The index advanced by 0.7 percent in April after climbing by an upwardly revised 0.4 percent in March. Economists had expected the index to rise by 0.3 percent. The larger-than-expected increase reflected positive contributions by seven of the 10 indicators making up the leading economic index. Building permits, the interest rate spread, the Leading Credit Index and average weekly initial jobless claims were among the biggest positive contributors.
- CPI fell 0.2 percent year-over-year, the biggest decline since October 2009. The drop was mainly due to the plunge in energy costs.
- U.S. manufacturing activity slowed in May, according to Markit’s manufacturing purchasing managers’ index (PMI) data. The headline reading of 53.8 was down from 54.1 in April, while new orders growth reduced to its slowest pace since January 2014. The Philadelphia Fed Business Outlook fell to a reading of 6.7 in May from 7.5 a month earlier. Economists had expected the measure to tick up to 8.
- According to the National Association of Realtors, existing U.S. home sales fell 3.3 percent in April to an adjusted annual rate of 5.04 million, falling back from March highs as prices rose. Economists had expected an April rate of 5.24 million.
- The Memorial Day holiday could kick off a busy summer travel season, as low gasoline prices and an improving job market are fueling vacation planning. About 37.2 million Americans will travel 50 miles or more from home during the holiday weekend, the most in 10 years according to AAA. Memorial Day marks the unofficial start of the peak vacation season.
- The upturn in lending to households and firms has been one of the reasons for the acceleration in euro-area growth. After strengthening substantially, the question now is how long this positive credit impulse can last. Eurozone money and lending numbers for April will be released next Friday.
- U.S. New Home Sales for April are expected to come in at 507,000 next week, up from 481,000 in March. A confirmation of that number would add to the recent momentum in housing.
- Revised Commerce Department data being released next week is forecast to show that the U.S. economy shrank by 0.9 percent in the first quarter, the weakest performance in a year. A wider trade deficit and less inventory investment than initially estimated will likely be responsible for the markdown after a previously reported 0.2 percent annualized gain in GDP.
- The preliminary U.S. Markit Services PMI release next week for the month of May is expected to come in at 56.5, down from April’s 57.4. A soft print will add to reluctance about a spring bounce in economic strength.
- U.S. April durable goods orders released next week are expected to fall 0.4 percent. This would add to the recent slew of weak manufacturing data.
For the week, spot gold closed at $1,206.20 down $17.86 per ounce, or -1.46 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, lost 4.21 percent. The U.S. Trade-Weighted Dollar Index gained 3.09 percent for the week.
|May-19||German ZEW Survey Current Situation||68||65.7||70.2|
|May-19||German ZEW Survey Expectations||49||41.9||53.3|
|May-19||Europe CPI Core YoY||0.60%||0.60%||0.60%|
|May-19||U.S. Housing Starts||1015K||1135K||926K|
|May-20||HSBC China Manufacturing PMI||49.3||49.1||48.9|
|May-21||U.S. CPI YoY||-0.20%||-0.20%||-0.10%|
|May-26||U.S. Durable Goods Orders||-0.50%||—||4.00%|
|May-26||U.S. New Home Sales||506K||—||481K|
|May-26||U.S. Consumer Confidence Index||95||—||95.2|
|May-28||Hong Kong Exports YoY||1.00%||—||-1.80|
|May-28||U.S. Initial Jobless Claims||270K||—||274k|
|May-29||U.S. GDP Annualized QoQ||-0.90%||—||0.20%|
- Harriet Hunnable, executive director of precious metals markets at CME group, speaking recently in London said that the Shanghai Gold Exchange is the most successful challenger so far in terms of liquidity in the gold market versus trading houses in the West. She added that the CME Hong Kong kilobar gold contract is doing phenomenally well for such a new product. As the physical trading in London has come to crawl due to fear of regulatory oversight this is a positive move as it increases transparency hopefully becomes the benchmark for gold price setting.
- D.E. Shaw’s latest 13F disclosure shows that one of its top new buys by market value for the first quarter was SPDR Gold Shares which received the highest allocation with nearly a quarter billion dollar purchase.
- Klondex Mines released drilling results at Fire Creek showing intercepts of 13.5 opt (461.6 g/t) over 11.5 ft (3.5 meters) on the Hui Wu Vein. These results provided further data that the initial grades reported are likely understating the grades and the additional infill results are pointing to overall higher grades. Dundee Capital Markets noted the new data increased their estimate to 3.45 opt versus 0.45 opt, for the area in question, thus increased their target NAV by 22 percent for Klondex Mines’ share price. By the end of the week, Klondex’s share price moved up by 8 percent.
- Gold took a plunge earlier in the week prior to the release of the Federal Reserve minutes. However, it rebounded after the minutes signaled officials are unlikely to raise interest rates at their next meeting
- Gold traders are divided on the price outlook for gold in the coming week with five bullish, six bearish, and two neutral.
- Northern Star Resources managing director Bill Beament said that after an attractive few years for acquisitions, the pendulum has swung too far and the market for gold assets up for sale has reached elevated levels. Thus, he deems it better to drill for gold than the price being offered on the corporate side to buy an asset.
- Oskar Lewnowski, co-founder of Red Kite, is planning to launch a new base and precious metals fund. Two years after striking out on his own to create private equity investment firm Orion Resource Partners, Lewnowski has already deployed almost $1 billion in equity, loans and royalty streams into at least 17 junior mining firms, and hired a physical metals trader to handle supply. This new fund will likely provide opportunity to fund the underserved junior mining space where there are good projects ready to taken to next level but the funding window has largely been closed. This could be a headwind to traditional royalty companies as new competition continues to enter this lucrative market.
- Cornerstone Macro came out with a piece in response to the pushback against its bearish comments on the U.S. dollar. The firm defends its thesis stating the dollar is about to do what it always does in the wake of global stimulus, to move lower as the world’s economies gain traction and their currencies recover. The study was not based on conjecture, as it showed over the last 35 years stronger global GDP coincided with weakness in the U.S. Trade Weighted Dollar Index.
- Bank of America points out U.S. equity funds have suffered $100 billion of outflows in 2015 while the S&P 500 has held steady, currently flirting with all-time highs. The bank says the upcoming summer months offer a lose-lose proposition for risk assets: Either the macro improves and the Fed gets to hike, or it doesn’t and EPS downgrades drag risk-assets lower. Thus, BoA advocates higher than normal cash levels and adding gold to portfolios. Further, summer starts the transition to seasonally stronger gold prices that go into the fall.
- Bron Suchecki, the Perth Mint’s manager of analysis and strategy, came out with his thoughts on the “war on cash” and its possible impact on gold. With negative rates and various governments around the world restricting consumer’s use of cash, he said people will turn to gold instead of holding bank deposits. However, if this is the case, he poses that governments will move from restrictions on cash to restrictions on gold.
- China is said to require tax audits for all gold traders this year. An annual list of businesses to face mandatory audits in 2015 includes gold traders, exporters taking advantage of tax rebates and companies involved in mergers, stake sales and other equity transactions.
- Zero Hedge noted the Economist published an editorial on gold earlier in the month essentially saying the metal was dead and buried. There was nothing new in the article, repeating many of the hollow arguments why one should not own gold because it has not performed over the last two years. Interestingly, the writer of the article noted that the Economist’s “cover stories” have often served as a contrary indicator whenever it comments on market, so perhaps this is a potential opportunity to consider.
Energy and Natural Resources Market
- Containers and packaging stocks outperformed this week alongside a sharp bounce in the U.S. dollar. The S&P 500 Containers & Packaging Index rose 1 percent this week.
- Utilities stocks also outperformed this week as the rise in yields appears to be over, at least for the time being. The S&P 500 Utilities Index rose 0.51 percent this week.
- Oil and gas refiners continue to rally due to improving margins. A better energy play at the moment, the S&P Supercomposite Oil & Gas Refining & Marketing Index rose 0.4 percent this week.
- Canadian metals and mining stocks fell sharply this week as China’s flash purchasing managers’ index (PMI) reading came in weaker than expected and the dollar bounced up. The S&P/TSX Metals & Mining Index fell -5.9 percent this week.
- Gold stocks pulled back in response to a stronger dollar along with the Federal Reserve forecasting a rate hike by the end of the year. The NYSE Arca Gold Miners Index fell -4.2 percent this week.
- Major integrated oil companies retreated this week as investors favored more upstream oil companies. The BI Global Integrated Oils Valuation Peers Index closed down -3.9 percent this week.
- The total number of onshore drilling rigs increased by three to 853, and oil rigs fell by just one to 659. This is the first overall increase since November, according to Baker Hughes, and is another signal that the abrupt halt in shale production may be over.
- Crude oil inventories in the U.S. are expected to decline for a fourth consecutive week next Wednesday. Refineries are continuing to ramp up production for summer gasoline.
- Core consumer price index (CPI) data rose 0.3 percent, the biggest gain since January 2013. Moreover, core inflation over the last three months increased by 2.6 percent, the most since August 2011. This is generally supportive for commodity prices which act as an inflation hedge.
- At next month’s OPEC meeting, it is expected that the oil cartel will continue to prefer gaining market share in the global oil market rather than defending prices. This could slow the summer price recovery as the market balances supply and demand.
- The U.S. dollar gained 3 percent this week after falling 7 percent from its peak in March. Further gains in the currency would be a sign of deflation globally, which could weigh on global demand and commodity prices.
- Expectations for lower-than-normal temperatures in the South and Southwest through the end of May, by MDA Weather Services, could derail the rebound in natural gas prices since the end of April.
- Chinese equities rose sharply this week, providing a jolt of momentum to the region. The weak Markit Manufacturing purchasing managers’ index (PMI) released on Friday added support to the notion that Chinese authorities will continue to prop up the economy. The Shanghai Stock Exchange Composite Index jumped 8.10 percent this week.
- Egyptian stocks rose sharply this week after the government announced it would delay a capital gains tax for two years in order to enhance the competiveness of domestic firms. The Egyptian Exchange EGX 30 Price Index closed up 8.25 percent this week.
- Greek equities bounced back as investors’ concerns over the country’s financial dispute with its European counterparts eased. Most of the news concerning Greece has been noise as most investors wait for a firm conclusion to the situation. The Athens Stock Exchange General Index rose 3.48 percent this week.
- Brazilian stocks retreated this week in response to a slowdown in economic activity for the month of March. Productivity contracted 1.07 percent from the prior month, compared to an expected contraction of only 0.5 percent. The Ibovespa Brasil Sao Paulo Stock Exchange Index fell 5.02 percent this week.
- Russian equities fell after industrial production in April lowered sharply, according to official data this week. Industrial production contracted 4.5 percent from the prior year, compared to an expected contraction of only 1.2 percent. Russia real GDP also lowered in the first quarter of 2015. The MICEX Index fell 1.22 percent this week.
- The Polish zloty slumped this week after a string of poor economic data was released. Year-over-year growth in retail sales for the month of April fell 2.1 percent, compared to an expected expansion of 0.3 percent. Furthermore, Sold Industrial Output contracted 8.1 percent, with the street forecasting a relatively minor contraction of only 4.9 percent. The zloty fell 4.78 percent this week.
- Greek banks have incredible upside potential given current valuations. The FTSE/ATHEX Banks Index is trading at a 0.45 price-to-book ratio. Greek banks could skyrocket should the country’s financial woes dissipate.
- Analysts are expecting Hungarian policymakers to lower the benchmark rate 15 basis points to 1.65 percent. The central bank has lowered rates consistently over the past two years in response to deflationary pressures. Should the central bank reduce rates to, or below, the expected 1.65 percent, equities could rally.
- Multiple infrastructure project approvals out of China this week confirm policymakers’ near-term priority to stabilize growth. Additionally, weaker-than-expected flash PMI in May could rekindle investor expectations for another reserve ratio cut soon. Coupled with cross-border mutual fund offerings between mainland China and Hong Kong in July, this might move both China A-shares and H-shares from consolidation to rally mode. This is especially notable given the brighter prospect for Chinese corporate margins later this year due to the lagged impact from lower interest rates and lower commodity prices.
- Poland’s presidential election will be held on Sunday, with the race too close to call. Many investors remain concerned that the current president will be ousted by the more left-leaning challenger. If this fear becomes a reality, the zloty currency along with polish stocks could take a hit.
- The data for Turkey’s trade balance will be released next week. With the government’s focus on monetary easing, the updated trade balance results could put additional pressure on the central bank to cut rates even further, hurting the lira.
- Deteriorating corporate earnings revisions, historically elevated valuations, renewed weakening of the local currency, and the further delay of general elections to September 2016 from February 2016, highlight a potential escalation of downside risks for Thailand. Foreign investors remained net sellers of Thai equities one year after the military coup.
Leaders and Laggards
|S&P Basic Materials||319.97||-2.47||-0.77%|
|Hang Seng Composite Index||3,932.41||+8.91||+0.23%|
|Korean KOSPI Index||2,146.10||+39.60||+1.88%|
|S&P/TSX Canadian Gold Index||166.40||-4.08||-2.39%|
|Natural Gas Futures||2.89||-0.13||-4.28%|
|10-Yr Treasury Bond||2.21||+0.07||+3.13%|
|S&P Basic Materials||319.97||+7.99||+2.56%|
|Hang Seng Composite Index||3,932.41||-332.01||-14.83%|
|Korean KOSPI Index||2,146.10||+2.21||+0.10%|
|S&P/TSX Canadian Gold Index||166.40||+5.59||+3.48%|
|Natural Gas Futures||2.89||+0.28||+10.78%|
|10-Yr Treasury Bond||2.21||+0.23||+11.62%|
|S&P Basic Materials||319.97||-5.82||-1.79%|
|Hang Seng Composite Index||3,932.41||+547.23||+16.17%|
|Korean KOSPI Index||2,146.10||+184.65||+9.41%|
|S&P/TSX Canadian Gold Index||166.40||-9.40||-5.35%|
|Natural Gas Futures||2.89||-0.06||-2.17%|
|10-Yr Treasury Bond||2.21||+0.10||+4.59%|
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.
The Emerging Europe Fund invests more than 25 percent of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.
Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.
Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5 percent to 10 percent of your portfolio in these sectors.
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.
Investing in real estate securities involves risks including the potential loss of principal resulting from changes in property value, interest rates, taxes and changes in regulatory requirements.
Past performance does not guarantee future results.
Some link(s) above may be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.
These market comments were compiled using Bloomberg and Reuters financial news.
Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end.
Holdings as a percentage of net assets as of 3/31/2015:
Dundee Capital Markets 0.00%
Klondex Mines (Global Resources Fund 2.27%, Gold and Precious Metals Fund 12.37%, World Precious Minerals Fund 13.18%)
Northern Star Resources (Gold and Precious Metals Fund 5.52%, World Precious Minerals Fund 0.59%)
*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment.
The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry.
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The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange.
The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges.
The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver.
The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.
The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks.
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The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500.
The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period.
The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500.
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The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500.
The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500.
The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500.
The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500.
The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver.
The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns.
The University of Michigan Confidence Index is a survey of consumer confidence conducted by the University of Michigan. The report, released on the tenth of each month, gives a snapshot of whether or not consumers are willing to spend money.
The Conference Board index of leading economic indicators is an index published monthly by the Conference Board used to predict the direction of the economy’s movements in the months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall economy.
The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
S&P 500 Containers & Packaging Index is a capitalization-weighted index that tracks the companies in the containers & packaging industry.
The S&P Supercomposite Oil & Gas Refining & Marketing Index is a capitalization-weighted index.
The S&P/TSX Capped Metals and Mining Index is a capitalization-weighted index.
BI Global Integrated Oils Valuation Peers Index is an equal-weighted index. The index is composed of major oil and gas companies.
The Shanghai Composite Index (SSE) is an index of all stocks that trade on the Shanghai Stock Exchange.
The EGX 30 Index is a major stock market index which tracks the performance of 30 most liquid stocks traded on the Egyptian Exchange.
The Athens Stock Exchange General Index is a capitalization-weighted index of Greek stocks listed on the Athens Stock Exchange.
The Bovespa Index, or Ibovespa (IBOV), is a gross total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange.
The MICEX Index is the real-time cap-weighted Russian composite index. It comprises 30 most liquid stocks of Russian largest and most developed companies from 10 main economy sectors. The MICEX Index was launched on September 22, 1997, base value 100. The MICEX Index is calculated and disseminated by the MICEX Stock Exchange, the main Russian stock exchange.
The FTSE/ATHEX Banking Index is a joint venture between FTSE and the Athens Stock Exchange (ATHEX). The market capitalization-weighted index captures the performance of banks listed on ATHEX and Cyprus Stock Exchange (CSE).