Mutual Fund, ETF, and Financial Markets Update July 2015

Volatility kicked up a notch in the second quarter of 2015 thanks to concerns about the economy of China, and possible defaults in Greece and Puerto Rico. The result was not good news for stocks or bonds. June’s losses essentially wiped out gains earlier in the quarter in the stock market which finished slightly above the flat line with a gain of 0.1%. The expectation that the FED will finally raise interest rates this year took bonds down (1.7%) for the quarter. Rising rates were also a significant factor in the big loss for Real Estate in the form of REITS which fell (10.0%) over the last three months. Aided by a falling US Dollar, oil rebounded for major gains and international stocks and bonds held on to positive returns this quarter. Small Cap growth stocks added 2.0% this quarter while Mid Cap value stocks went in the opposite direction falling (2.0%) over the last three months.

Investment Returns as of June 2015

Investment Returns as of June 2015

It was an unusual quarter for financial markets as the uncertainty did not result in the typical flight to quality. Instead interest rates rose, which caused a fall of (9.6%) by iShares Barclays 20+ Year Treasury Bond (TLT). While rising rates often help the US dollar, you could not tell that from PowerShares DB US Dollar Index Bullish (UUP), which fell (3.4%). Smaller continued to be better as iShares Russell Microcap Index (IWC) picked up 3.1% while Large Cap ETF PowerShares Nasdaq 100 (QQQ) gained 1.6%. Given those two returns it is surprising that SPDR S&P MidCap 400 (MDY) actually lost (1.1%).

iShares MSCI Brazil Index (EWZ) turned out to be our best performing country ETF with a gain of 6.4% while iShares MSCI Malaysia Index (EWM) was the one to avoid as it lost (7.7%). Commodities turned up in June with PowerShares DB Agriculture (DBA) picking up 5.5% while SPDR S&P Biotech (XBI) was the top sector with a gain of 12.0%. On the other end of the spectrum, iShares FTSE NAREIT Real Estate 50 (FTY) lost (9.7%).

The fall in the US Dollar hurt international funds that are hedging against the dollar like PIMCO Foreign Bond (USD-Hedged) (PFODX) which lost (4.1%). On the other hand, that help unhedged funds like Fidelity New Markets Income (FNMIX) which picked up 1.5%. Some of our better domestic equity mutual funds were Rice Hall James Small Cap (RHJMX) which added 3.9%, Fidelity Low-Priced Stock (FLPSX) which gained 2.5% and Fidelity Focused Stock (FTQGX) which returned 0.1%. The falling dollar was good news for investors in

International stocks as Fidelity International Growth (FIGFX) added 0.7%, Wasatch International Opportunities (WAIOX) returned 3.2% and Driehaus Emerging Markets Small Cap (DRESX) grew by 3.0%. International Real Estate took a much smaller hit than domestic REITs as Third Avenue Real Estate Value (TVRVX) lost only (1.5%). In the alternatives space Boston Partners Global Long/Short (BGRSX) gained 4.0% while Aspen Managed Futures Strategy (MFBPX) gave back less of its 2014 gains than most Managed Futures funds with a drop of (5.2%).

Our Favorite Mutual Funds, Favorite ETFs, Mutual Fund Portfolios, ETF Investment Portfolios,, and Favorite Fidelity Funds have been updated through June 2015.