May 4, 2005

April Showers Bring Soggy Returns

A black cloud hovered over U.S. stock funds in April. The average domestic equity fund lost 3.43% for the month, continuing on a negative trend, and the Standard & Poor's 500-stock index fell 2.0%.

All fund style categories faired poorly in April, ending the month in the red. Large-cap value funds lost the least, falling 2.2% on average, while small-cap growth funds were hardest hit, plunging 5.8%. Generally speaking, large-cap stocks outperformed small ones for the period, and value performed 'better' than growth.

Potomac Small-Cap Short Fund (POSSX), a small-cap blend fund, was the best-performing portfolio in April gaining 11.5% by virtue of its short strategy. The small-cap "bear" fund is designed to rise when its benchmark, the Russell 2000, falls. In contrast, Apex Mid Cap Growth Fund (BMCGX), a small-cap growth portfolio, ended the month with the poorest returns. It plunged 9.3% in April.

With economic data continuing to come in weaker than expected during the month, the Federal Reserve's plan to raise rates at a more accelerated pace looks like it may be temporarily on hold. Factors contributing to the market's losses in April were lower-than-expected real GDP in the first quarter amid soaring energy prices and rising rates, as well as lower consumer confidence and sentiment.

Standard & Poor's Investment Policy Committee reduced its mid-year and year-end targets for the S&P 500 and Nasdaq, stating that it now now "sees the '500' ending June at 1190 and December at 1245 (for a full-year advance of 2.7%), while the Nasdaq should close out June and December at 2065 and 2150, respectively, for a full-year decline of 1.2%." Increased risks to equity returns on prospects of a near-term slowdown in real GDP growth were cited by the committee.

Offsetting dim news in April were better-than-expected home sales, which were strong despite a decline in housing starts. Sales of existing homes rose 1.0% in March, while sales of new houses jumped 12.2%. Consumer spending rose 0.6%, while personal income was up 0.5%. Earnings are coming in higher than expected in the first quarter, and operating earnings are expected to rise 11%, the twelfth consecutive double-digit quarter. Also on the plus side for the month, crude oil prices dropped below $50 a barrel, down from a record $57.25 four weeks ago.

Below is a list of the best- and worst-performing domestic stock funds by style category for April 2005.

Fund Investment Style Average Returns April 2005 (%)
Large Cap Growth

-2.44

Large Cap Value

-2.19

Large Cap Blend

-2.20

Mid Cap Growth

-4.52

Mid Cap Value

-4.06

Mid Cap Blend

-4.07

Small Cap Growth

-5.77

Small Cap Value

-5.24

Small Cap Blend

-5.02

All Cap Growth

-3.44

All Cap Value

-3.23

Domestic Equity Funds*

-3.43

S&P 500-Stock Index

-2.00

Domestic Equity Funds* -- April 2005 Returns Best Individual Performer Returns (%) Worst Individual Performer Returns (%)
Large Cap Growth ProFunds:UltraShort OTC/Iv (USPIX)

+8.56

ProFunds:UltraOTC/Sv (UOPSX)

-8.93

Large Cap Value Principal Equity Income/A (PUTLX)

+1.02

ING Mid Cap Value Fund/C (IMVCX)

-7.99

Large Cap Blend Rydex Dynam:Inv Dyn Dow/A

+5.81

Rydex Dynam:Lng Dyn Dow/C

-6.31

Mid Cap Growth FMC Select

-1.32

Navellier Millennium Top 20/A (NTGRX)

-9.25

Mid Cap Value Homestead Funds Value Fd (HOVLX)

-0.49

CGM Capital Development Fund (LOMCX)

-9.09

Mid Cap Blend Rydex:Inverse Mid Cap/A

+4.16

ProFunds:UltraMid Cap/Sv (UMPSX)

-8.27

Small Cap Growth Frontier Funds:Equity Fund Portfolio (FEFPX)

+4.17

Apex Mid Cap Growth Fund (BMCGX)

-9.30

Small Cap Value CM Advisers Fund (CMAFX)

0.00

Dreyfus Small Company Value (DSCVX)

-9.21

Small Cap Blend Potomac Small Cap/Short/Investor (POSSX)

+11.50

Rydex Srs Tr:Mekros Fund/C (RYCMX)

-8.65

All Cap Growth Wisdom Fund/Instl (WSDIX)

-0.39

Eaton Vance Tax-Managed Multi-Cap Opport/C (ECCPX) -8.16
All Cap Value Fairholme Fund (FAIRX)

0.00

Eastern Point Adv Cp Ap/C -6.92

*Excluding sector and balanced funds.

Source: Standard & Poor's. Total returns include reinvested dividends. Preliminary data as of 4/29/05.

Contact Bob Keane with questions or comments at: .

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