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.