Strong March performance pushes stock funds positive for first quarter

Even though stock funds scored big gains in March, they're still trailing bonds for 2016

Apr 1, 2016 @ 11:26 am

By John Waggoner

If your clients are complaining about their bond positions, this would be a good time to remind them about why they own fixed income. Even though stock funds scored big gains in March, they're still trailing bonds for 2016 — and the past 12 months.

The Standard and Poor's 500 stock index gained 6.78% in the first quarter, including dividends, pushing the index to a 1.35% gain for the year, according to S&P. The average large-company blend fund, the Morningstar mutual fund category most closely matched with the S&P 500, gained 6.37% for the month and 0.29% for the first quarter, according to preliminary numbers from Morningstar.

But intermediate-term bond funds, a popular bond category, have still beaten stocks for 2016 and the past 12 months, rising an average 2.48% for the quarter and 1.30% for March. Bond funds have gained 0.64% for the past 12 months, vs. a 1.96% loss for the average large-company blend fund.

One lesson: As low as interest rates are, they can always go lower, and that's good for bonds. While the U.S. 10-year Treasury yield is currently 1.79%, Germany's 10-year government note is 0.15% and Switzerland's is -0.38%.

Another: The dollar can either help or hinder overseas bond funds. In this case, the falling dollar gave a tail wind to emerging markets bond funds, up 5.17% in March, and world bond funds, up 3.12%.

DOLLAR WEAKNESS

For foreign large blend funds, however, the falling dollar wasn't enough to push returns past U.S. stock funds. The average foreign large blend fund gained 6.86% in March and fell 1.99% for the quarter. But emerging markets funds soared 11.02% in March.

Muni bond funds did what they do best, which is produce tax-free income in the most boring possible way. National intermediate-term muni funds gained 0.30% in March and 1.41% for the quarter.

Interestingly, long-term California muni funds have gained an average 7.29% a year for the past five years. While California's finances are still most charitably a mess, they're better than they were five years ago. Its general obligation bonds have risen to an A+ rating from Moody's, up from BBB in 2009.

Among diversified U.S. stock funds, mid-cap value jumped the highest in March, gaining an average 8.52%. Top performer: American Beacon Mid-Cap Value (AACIX), up 9.49% in March and 1.21% for the quarter. In the long run – which is to say, five years – large-cap growth has been the winner, gaining an average 9.92% a year.

In the Department of Remarkable Comebacks:

• Latin American funds soared 16.5% in March and 14.74% for the first quarter. The funds have clocked an average 12.29% loss the past five years.

• India funds jumped 12.44% in March, but are still down 3.85% for 2016.

Equity gold funds, down an average 18.06% a year the past five years, jumped 6.57% in March and 40.7% for the quarter. These funds invest in the stocks of gold mining companies, rather than the yellow metal, and get a big bump in earnings when gold prices rise.

• Energy master limited partnership funds gained 9.23% in March. The funds, the most recent darlings of income investors, got greased by the plunge in oil and natural gas prices. They're still down 36.19% the past 12 months.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

3 Questions to ask yourself when making your succession plan

Michael Futterman from Janus Henderson Investors has sage advice for advisers as they approach retirement.

Latest news & opinion

The power of philanthrophy shifts to women, and advisers are taking notice

Philanthropic women are growing in number — and stature.

Cetera brokers may go elsewhere with no stay bonuses on horizon

Some may feel spurned and leave, while others will simply shrug off latest slight and stay.

Fidelity backs away from being 'point in time' fiduciary for 401(k) plans

Some advisers think this indicates other providers will pivot in light of DOL fiduciary rule's death.

Morgan Stanley CEO is happy that brokers are staying put

Firm has seen little attrition since it dumped the broker protocol last fall, Gorman says.

Bills to reform adviser regulation, increase sophisticated investors and protect seniors pass House

Measures included in package of 32 bipartisan bills meant to ease rules, spur investment

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print