Stocks continued to outshine bonds in February as inflation fears, state budget default hysteria, rising commodities, and growing inflation and turmoil in some emerging markets failed to spook investors (though in recent days things have become a little dodgy as oil prices hovered around $100).

Benchmark Vanguard index funds for February: 500 Index (VFINX) : 3.42%, Total Bond Market (VBMFX) : 0.16%, International Index (VTMGX) : 3.55%. Our Conservative portfolio was up 1.29% while our Aggressive portfolio gained 2.26%.

Emerging markets were the only real weak area last month, with the typical emerging market fund down just under 1% and Vanguard Emerging Markets Stock Index Fund (VEIEX) down 0.85%.

At the top of the fund charts for February were precious metals funds, up 9.6%, energy funds, up 5.5%, small cap growth funds, up 5.1% and Japan funds up (for a change) 5.1%. Muni bonds funds rebounded between 1% and 2%. 

At the bottom were funds investing in the Pacific region but not Japan, notably China, down around 3%. 

In portfolio fund action last month the winners included:

• Satuit Capital Micro Cap (SATMX) rose 5.56% in February, better than the S&P 500 by 2.1%.
• Investment Grade Bond fund Metropolitan West Total Return (MWTRX) increased 0.48%, as did American Century Core Plus (ACCNX), beating the bond market by 0.3%.
• Our Small Cap Growth fund Janus Triton T (JATTX) climbed 3.66% for the month, better than the S&P 500 by 0.2%.
• Royce Financial Services Fund (RYFSX) climbed 3.66% in February, besting the S&P 500 by 0.2%.
• Our Large Cap Growth pick PRIMECAP Odyssey Stock (POSKX) climbed 3.52% in February, better than the S&P 500 by 0.1%.

February’s losers included: 

• Our Long/Short fund PowerShares DB Commodity Double Short (DEE), down 10.09% in February, worse than the S&P 500 by 13.5%, as commodities rose sharply.
• PowerShares DB US Dollar Index (UUP) fell 1.21%, losing to the S&P 500 by 4.6% as the dollar weakened. 
• Scout International Discovery (UMBDX) increased 0.81% for the month, worse than the S&P 500 by 2.6% and reflecting this funds inclusion of smaller cap and emerging market stocks.
• Parnassus Equity Income (PRBLX) climbed 1.91%, losing to the S&P 500 by 1.5%.
• UMB Scout Worldwide (UMBWX) climbed 2.07% in February, worse than the S&P 500 by 1.4%

Note: Unless otherwise noted all index returns are from relevant Vanguard™ open end mutual funds and therefore include expenses and dividends.