Reuters has an article today noting that the S&P500 index is in negative territory for the 2011 year. That’s bad news for the huge number of investors invested in index funds. The benchmark for many mutual funds and other investment’s performance is down approximately 3 percent year to date. To get make the market index positive for 2011 would take a return above 1,257.64.
Ironically, most investors are used to getting a so-called “Santa Claus” rally at the end of the year as money managers position their balance sheets and investments ahead of end of year reporting. However, this year, the problems in Europe, their affect on the Euro, and the potential collateral damage in the U.S. markets has kept investors from being in a merry mood.
As the year winds down, trading volume typically declines in the markets. Mutual funds, hedge fund managers and other money managers that are up for the year, sell everything and hold cash through the end of the year to lock in their gains.
Smaller investors, aware of the holidays, also position themselves to have only those investments they wish to hold for the long-term. That not only frees them up from having to watch the markets while at Great Aunt Margret’s house, it also prevents any surprise capital-losses or capital-gains that might upset carefully planned tax strategies.
The final two weeks of the year may produce enough of a rally to push the S&P 500 into positive territory, but it won’t be enough to make anything more than single digits show up in the 2011 column for all of those investor marketing materials and mutual fund prospectuses.
As anyone who lived through it (all of us) can tell you, 2011 doesn’t deserve to go down as a “good year” and it most certainly won’t look that way on paper when the math is all said and done.
Mutual Fund Returns 2011
I thought it would be interesting to see how some of the big mutual funds were doing in light of the single-digit change (positive or negative) likely coming for the S&P 500 index. Keep in mind that many of these funds do not use the S&P500 for their benchmark. However, investors are free to compare their investment returns to whatever they wish, and I always remember that I can have a low-expense S&P500 Index based ETF for much less than any mutual fund, so if they better at least make me feel good about it.
Unless otherwise specified, all funds listed are the “main” share class. Check the ticker symbol listed if you are really interested.
Year to Date Returns as of Market Close Friday, December 16, 2011 according to Morningstar.com.
- PIMCO Total Return Fund (PTTRX) +3.68%
- Fidelity Contrafund (FCNTX) -2.47%
- American Funds Growth Fund of America (AGTHX) -7.19%
- American Funds Capital Income Builder (CAIBX) +0.28%
- American Funds Income Fund of America (AMECX) +2.94%
- Vanguard 500 Index Fund (VFIAX) -1.07%
- Dodge & Cox International Stock Fund (DODFX) -18.62%
- Dodge & Cox Stock Fund (DODGX) -6.87%
As you can see, some funds are right there and some are getting hammered. International funds, particularly those with heavy investments in Europe, are understandably volatile. Bond funds are less volatile, although many are not in positive territory either. It’s hard to make much money in bonds when prices are held hostage by a zero percent interest Fed policy.
This year wasn’t necessarily pretty, but considering the state of the economy for much of the year and the slow improvements in the U.S. job market, there really isn’t much reason to think the stock market would react any differently.
