Never miss a trade! Sign up for MAXfunds Powerfund Portfolio’s FREE email alerts! CLICK HERE!

May 2014 Performance Review

June 2, 2014

In May, lingering global stock and bond market fears evaporated like air conditioner condensation on hot asphalt. We even had a weather-induced (hopefully) negative first quarter GDP figure. Previously lagging emerging markets rebounded while the S&P 500 gained over 2%. More surprising (to some) was a retreat in interest rates, pushing bond prices higher and likely playing a role in stock prices rising. What about the theory that when the Federal Reserve stopped buying bonds rates would take off? Many billions were lost this year by professionals shorting treasury bonds.

Both our portfolios did well considering our low equity stake as they benefited from longer term bonds. The Conservative portfolio gained 1.78% while our Aggressive portfolio was up 2.05%. Benchmark Vanguard funds for May 2014: Vanguard 500 Index Fund (VFINX) up 2.33%; Vanguard Total Bond Market Index Fund (VBMFX) up 1.05%; Vanguard Developed Markets Index Fund (VTMGX) up 1.63%; Vanguard Emerging Markets Stock Index (VEIEX) up 3.72%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 1.88%.

Small-cap stocks continued to lag with a sub-1% return — or in the case of our micro-cap fund Satuit Capital Micro Cap (SATMX) a -1.76% return. Meanwhile larger-cap stocks were strong, notably growth stocks. Our Vanguard MegaCap Growth (MGK) beat the S&P 500 with a 3.59% return.

Foreign markets generally outpaced our markets, except for Europe — our Vanguard European ETF (VGK) was up just 0.78%. Indian stocks topped the charts — up over 10% on top of an already strong rebound this year. Our own emerging market fund with exposure to India iShares MSCI BRIC Index (BKF) gained 4.48%.

All bonds were strong but investment grade longer-term bonds were at the top with returns at around 2%. No bond did better than the longest duration and safest, U.S. zero coupon bonds. Our Vanguard Extended Duration Treasury (EDV) was gained 4.1% in May, clawing back from the rise in rates last year. What is essentially floating rate junk bonds held steady with DoubleLine Floating Rate N (DLFRX) up just 0.43%, though the safer (from credit risk, not necessarily interest rate risk) bond index rose over 1%. This too-popular asset class is going to underperform and we may exit the next time rates rise to reposition into higher-duration bonds.

In sector funds, telecom was at the top, as seen in our holding Vanguard Telecom Services ETF (VOX). Technology led the market again with just under 4% returns for the month. Healthcare gained about 3%.

Laggards in May included utilities — like our American Century Utility Income (BULIX) which gained just 0.57%. We're out of financials which are having a bad year relative to the market. Financials are essentially flat in 2014 after just over a 1% gain in May. Oil was strong, though natural resource funds were not. This hurt our recession hedge PowerShares DB Crude Oil Dble Short (DTO), which fell 7.58% last month. The only negative sector in May was precious metals funds, down over 6% as the recent rebound reversed sharply. This made our gold short fund Gold Short (DZZ) — which has been lagging lately — our top holding for the month, up just shy of 6%.

Stock Funds1mo %
Gold Short (DZZ)5.94%
iShares MSCI BRIC Index (BKF)4.48%
Vanguard Telecom Services ETF (VOX)3.87%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)3.72%
Vanguard MegaCap Growth (MGK)3.59%
PRIMECAP Odyssey Growth (POGRX)2.71%
[Benchmark] Vanguard 500 Index (VFINX)2.34%
Vanguard Europe Pacific ETF (VEA)1.77%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)1.63%
Artisan Global Equity (ARTHX)1.62%
Wasatch Frontier Emerg Sm Count (WAFMX)1.53%
Vanguard European ETF (VGK)0.78%
Wasatch Long/Short (FMLSX)0.67%
American Century Utility Income (BULIX)0.57%
Satuit Capital Micro Cap (SATMX)-1.76%
PowerShares DB Crude Oil Dble Short (DTO)-7.58%
Bond Funds1mo %
Vanguard Extended Duration Treasury (EDV)4.10%
Vanguard Long-Term Bond Index ETF (BLV)2.07%
[Benchmark] Vanguard Total Bond Index (VBMFX)1.05%
PIMCO Mortgage Opportunities D (PMZDX)1.02%
DoubleLine Floating Rate N (DLFRX)0.43%