Close Close

Portfolio > Mutual Funds > Equity Funds

Domestic Equity Funds -- January 2005 Review

Your article was successfully shared with the contacts you provided.

Feb. 2, 2005 — The U.S. stock market started 2005 with a whimper, rather than a bang. All domestic equity fund categories declined in January. The average stock portfolio dropped 2.71%, versus a loss of 2.53% for the S&P 500. The tech-heavy NASDAQ tumbled 5.20%.

A number of factors contributed to the weak markets in January. For starters, “investors likely took some profits following the post-election, fourth-quarter rally,” noted Michael Sheldon, chief market strategist and director of equity research at Spencer Clarke LLC. High oil prices, worries surrounding the elections in Iraq, comments by the Federal Reserve that interest rates will rise this year, and concerns over the growing trade and budget deficits, also weighed heavily on investor sentiment, he added.

Although most corporate earnings matched or slightly exceeded analysts’ estimates in the latest quarter, Sheldon noted that investors are worried that earnings growth will decelerate as the economy slows down. In fact, several high-profile companies like eBay (EBAY), Caterpillar (CAT) General Motors (GM), and Citigroup (C), have already issued profit warnings. Operating earnings growth for the S&P 500 is expected to average 9.47% in 2005, less than half of the 23.02% gain recorded last year, according to Howard Silverblatt, equity market analyst at Standard & Poor’s.

The current bull market, now about 26 months old, may be entering its “latter” innings, although “we may now see a rotation from small-cap stocks to large-caps for market leadership,” Sheldon said. Noting that small-caps have significantly outperformed large caps and the broader market over the past five years, he added that “as the economy softens, earnings growth weakens, and the Fed commits to further tightening, large-cap stocks, especially in defensive sectors like utilities, health care and consumer staples, will likely outperform as they have historically in such an environment.” While 2005 is only one month old, money is already moving into these areas, away from small-cap issues and higher-beta cyclicals like technology, he said.

The weak dollar, another dark cloud hanging over investors, may also provide a benefit to large caps, said Matthew Sauer, co-manager of the Oak Value Fund (OAKVX). Many large firms export to foreign nations, while smaller companies restrict their products to local consumers, he noted. Although the dollar has rallied somewhat in the new year, Standard & Poor’s chief economist David Wyss thinks it will be down by the end of the year. “Currencies always tend to move in stair-step fashion, he noted. “They take a step down, then stabilize or even rally a bit before taking the next step.”

The market has provided mixed signals about its direction in 2005. Sam Stovall, chief investment strategist at Standard & Poor’s, cites the famous ‘January Barometer’ theory, which espouses that “negative performance in January is typically a bad omen for the remainder of the year, particularly on the heels of two bullish years.” However, he is forecasting a gain of 7.3% for the S&P 500 this year.

ICON Advisers Inc., which runs the ICON mutual funds, is upbeat about 2005. The firm’s investment committee notes that interest rates are still at historically favorable levels, and while inflation has risen, it has done so at modest levels. They believe that current conditions remain favorable for U.S. stocks, and that domestic equity markets are presently about 17% undervalued.

Steve Neimeth, co-manager of the SunAmerica Value Fund/A (SSVAX), said that based on earning growth forecasts for 2005 and 2006, the markets are presently “fairly valued to undervalued.” Quincy Krosby, chief investment strategist at Hartford Investment Management Co., said that during 2005, “absent any external or systemic shocks to the economy, economic and profit momentum should remain positive, with consensus estimates giving the broader market a return of 7%-10%.”

Fund Investment Style

January 2005 Average Returns (%)

2004 Average Returns

Large-Cap Growth



Large-Cap Value



Large-Cap Blend



Mid-Cap Growth



Mid-Cap Value



Mid-Cap Blend



Small-Cap Growth



Small-Cap Value



Small-Cap Blend



All-Cap Growth



All-Cap Value



Domestic Equity Funds*



S&P 500-Stock Index



Domestic Equity Funds* — January 2005 Returns

Best Individual Performer

Returns (%)

Worst Individual Performer

Returns (%)

Large-Cap Growth Rydex Dynamic Funds:Venture 100 Fund/H (RYVNX)


TCW Galileo Aggressive Growth Equity Fund/N (TGANX)


Large-Cap Value Neuberger Berman Partners/Advisor (NBPBX)


ING Large Cap Value Fund/B


Large-Cap Blend Rydex Dynamic Funds:Inverse Dynamic Dow 30/H (RYCWX)


Analysts Aggressive Stock Fund


Mid-Cap Growth Hennessy Focus 30 (HFTFX)


TCW Galileo Growth Equities Fund/I (TGGEX)


Mid-Cap Value Volumetric Fund (VOLMX)


ING Mid Cap Value Fund/B (IMVBX)


Mid-Cap Blend ProFunds:UltraShort Mid Cap/Investor (UIPIX)


Ameritor Security Trust Fund (ASTRX)


Small-Cap Growth Fidelity Adv Sm Cp Gr/T (FCTGX)


Van Wagoner Emerging Growth Fund (VWEGX)


Small-Cap Value CGM Focus Fund (CGMFX)


Tocqueville Small Cap Value Fund (TSCVX)


Small-Cap Blend ProFunds:UltraShort Small Cap/Inv (UCPIX)


ProFunds:UltraSmall Cap/Sv (UAPSX)


All-Cap Growth Potomac Evolution Managed Equity Fund (PEVEX)


Managers AMG Essex Aggressive Growth (MEAGX)


All-Cap Value Diamond Hill Focus/A (DIAMX)


Legg Mason Inv Tr:Opportunity Tr/Prim (LMOPX)


*Excluding sector and balanced funds.

Source: Standard & Poor’s. Total returns include reinvested dividends. Preliminary data as of 1/31/05.

Contact Bob Keane with questions or comments at: [email protected].


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.