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March 2014 Performance Review

April 1, 2014

March was relatively smooth for the markets, with stocks up slightly and the broad bond index down a bit. It was one of the Powerfund Portfolios better months relative to the markets, particularly for our Conservative portfolio which is up 3% for the year over both the stock and bond markets.

The Conservative portfolio gained 0.43% in March. Our Aggressive portfolio was up 1.01%. Benchmark Vanguard funds for March 2014: 500 Index (VFINX) up 0.82%; Total Bond Market Index (VBMFX) down 0.15%; International Index (VTMGX) down 0.42%; Emerging Markets Stock Index (VEIEX) up 3.86%; Vanguard STAR (VGSTX), a total balanced portfolio, was unchanged.

There was particular strength in Utilities and Telecom (and value stocks in general) in March. We own these sectors in both of our portfolios. Interestingly healthcare - usually attractive to value oriented investors and those seeking safety (not including biotech) - was weak. We recently got out of healthcare because it has just had too many years of outperformance and the biotech area in particular was becoming volatile and too hot after very strong performance.

In March we saw one of the greatest divergences between value and growth stocks in some time. While the S&P 500 was up slightly, growth stocks, like our own Vanguard MegaCap Growth (MGK), was down 1.51%. This while a fund we don’t own in our model portfolio but do own in some client accounts, Vanguard Value ETF (VTV), was up 2.69%. Our weakest areas were our growth and funds. Larger cap foreign stocks in emerged economies slid, causing over 2% drops in our Vanguard European ETF (VGK), while emerging markets rebounded – notably in India and Latin America - after generally lousy returns in previous months. This caused some large gains compared to the stock market here in both our iShares MSCI BRIC Index (BKF) and Wasatch Frontier Emerging Small Countries (WAFMX). The great gold rebound may have ended in March with a roughly 8% slide in most funds in this area.

Bonds were our bigger win; all of our bond funds were up and beat the bond index, which posted a small loss. This was largely due to longer-term bonds performing well and our owning higher credit risk bonds in some cases. Also a probably factor was the billions coming out of bond funds, much of it in index funds, while the funds we own here are not seeing large outflows (PIMCO Bond ETF [BOND] a possible exception, though that fund was up 0.20% for the month). 

All this bond action could be leading to our prediction of a flatter yield curve years out, where those hoarding lower duration bond funds actually lose while those in longer term more interest rate sensitive funds sit back and earn higher yields. 

Stock Funds1mo %
Gold Short (DZZ)5.91%
Vanguard Telecom Services ETF (VOX)5.33%
American Century Utility Income (BULIX)4.06%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)3.86%
iShares MSCI BRIC Index (BKF)3.49%
Wasatch Frontier Emerg Sm Count (WAFMX)2.26%
Wasatch Long/Short (FMLSX)1.43%
[Benchmark] Vanguard 500 Index (VFINX)0.82%
PowerShares DB Crude Oil Dble Short (DTO)0.71%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)-0.42%
Vanguard Europe Pacific ETF (VEA)-1.41%
Vanguard MegaCap Growth (MGK)-1.51%
Satuit Capital Micro Cap (SATMX)-1.77%
PRIMECAP Odyssey Growth (POGRX)-1.99%
Vanguard European ETF (VGK)-2.13%
Artisan Global Equity (ARTHX)-2.94%
Bond Funds1mo %
Vanguard Extended Duration Treasury (EDV)1.91%
Vanguard Long-Term Bond Index ETF (BLV)0.91%
DoubleLine Floating Rate N (DLFRX)0.16%
PIMCO Mortgage Opportunities D (PMZDX)0.10%
[Benchmark] Vanguard Total Bond Index (VBMFX)-0.15%