Reply to comment

The Powerfund Portfolios posted solid gains in May, with both the Conservative and Aggressive portfolios beating Vanguard's main U.S. stock index and total global fund. As we're taking less risk than these funds it's harder to do this in an up market (as May was), than a down one.

We've been more or less lagging benchmarks indexes since the Trump election upset so it is a little early to spike the football, but our year-to-date figures are now closing in on these hard to beat funds. Adjusting for risk we more often beat both Vanguard's U.S. stock index and total global fund, as will probably become apparent again in any meaningful stock market drop.

In May, our Conservative portfolio gained 2.03%. Our Aggressive portfolio jumped 1.92%. Benchmark Vanguard funds for May 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 1.39%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.67%; Vanguard Developed Markets Index Fund (VTMGX) up 3.41%; Vanguard Emerging Markets Stock Index (VEIEX) up 1.22%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, gained 1.86%.

While the stock market's brief sharp drop in mid-May has largely been erased in recent days, most of our upside has been from the U.S. dollar declining as the euro, and foreign stock markets, have been hot (after a long spell of underperformance for both).

In the U.S. the strongest funds in May were in large-cap growth stocks. Small-cap value funds where down nearly 3% on average. We're short small-cap but the hedge has mostly been a bust in this hot market led by riskier small-caps. In general, we would prefer shorting small-cap value as that category has been the most overpriced of late, but this is not easy to do with inverse ETFs.

Almost all foreign markets beat the S&P 500 in May, except for Latin American funds which were the sole big category loser, down about 3%. This dragged on our iShares MSCI BRIC Index (BKF) stake which posted only a 1.36% return.

Long-term investment-grade bonds were top performers as interest rates declined. We had a 3.2% gain in Vanguard Extended Duration Treasury (EDV) and a 1.9% jump in Vanguard Long-Term Bond Index ETF (BLV). The falling dollar helped boost SPDR Barclays Intl. Treasury (BWX) 1.92%. Higher-risk bonds did fine but the bigger gains where in more interest rate sensitive bonds. We're considering exiting our strong performing high yield bond fund Artisan High Income Fund (ARTFX), which was up 0.58% in May.

In sectors, financials and energy were weak — high beta stocks that have done well since Trump's election. The only real drags were Vanguard Telecom Services ETF (VOX), down 3.06%, and iShares Mortgage REIT (REM), down 1.47%. The former's poor performance was a bit of a surprise as safe and yield have been doing well. The latter's rough month was probably just a bit of a correction after big recent gains.

Other than a basically flat month shorting gold, our shorts were helping returns (it has been awhile..) with Proshares Ultrashort NASDAQ Biotech (BIS) up 7.49%, ETRACS 1xMonthly Short Alerian MLP (MLPS) up 6.38%, PowerShares DB Crude Oil Dble Short (DTO) up 5.31%, and Proshares Ultrashort Russel2000 (TWM) up 3.67%. With mostly big returns abroad — iShares MSCI Italy Capped (EWI) up 5.37%, and Vanguard European ETF (VGK) up 4.91% — AND good returns in bonds, we couldn't help but have a good May.

Stock Funds1mo %
Proshares Ultrashort NASDAQ Biotech (BIS)7.49%
ETRACS 1xMonthly Short Alerian MLP (MLPS)6.38%
iShares MSCI Italy Capped (EWI)5.37%
PowerShares DB Crude Oil Dble Short (DTO)5.31%
Vanguard European ETF (VGK)4.91%
Artisan Global Equity (ARTHX)4.04%
Vanguard Utilities (VPU)4.00%
Proshares Ultrashort Russel2000 (TWM)3.67%
Vanguard Europe Pacific ETF (VEA)3.41%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)3.41%
[Benchmark] Vanguard 500 Index (VFINX)1.39%
iShares MSCI BRIC Index (BKF)1.36%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)1.22%
Homestead Value (HOVLX)0.40%
Vanguard Value (VTV)0.06%
Gold Short (DZZ)-0.19%
iShares Mortgage REIT (REM)-1.47%
Vanguard Telecom Services ETF (VOX)-3.06%
Bond Funds1mo %
Vanguard Extended Duration Treasury (EDV)3.20%
SPDR Barclays Intl. Treasury (BWX)1.92%
Vanguard Long-Term Bond Index ETF (BLV)1.90%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.67%
Artisan High Income Fund (ARTFX)0.58%
Vanguard Mortgage-Backed Securities (VMBS)0.50%

Reply

CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.
Image CAPTCHA
Enter the characters shown in the image.