After the troubled 2016 ended on a strong note, mutual fund bigwigs expect to see stock gains this year. President Donald Trump’s market-friendly policies, hike in key interest rate and upward movement in oil prices will be a shot in the arm for financial, technology and energy mutual funds.
Some dividend paying funds also stand to benefit as Trump’s encouraging policies are turning the broader market into one giant bubble, raising possibilities of disenchantment for investors in the near term. Furthermore, to reduce the overall risk of a portfolio, it is prudent to invest in short-term bond funds which fall under the safer section of debt securities due to their short duration and subsequent near-cash status.
How Funds Performed in 2016
The market witnessed two distinct phases in 2016, with a large section of investors struggling until Halloween. After that, there were inflows in the market over the next six to seven weeks. The inflows were mostly driven by Trump’s tax cuts and fiscal stimulus measures, which are expected to propel economic growth.
The S&P 500 was able to conclude a tumultuous year with 12.48% gain, while U.S. diversified stock funds ended the year with an average gain of 10.81% after climbing 4.06% in the fourth quarter, according to Lipper Inc. Small-cap value funds performed the best among U.S. diversified stock funds in 2016, with a return of 26.49%. The top-performing fund with a minimum $100 million in assets was Aegis Value (AVALX – Free Report) , a small-cap value portfolio that soared 70.51%. Small-cap blend funds, in the meantime, were close on the heels with a gain of 21.18%.
While U.S. diversified stock funds rose on an average 1.46% in December, risky assets such as high yield mutual funds advanced 1.76% and ended the year with a staggering return of 13.34%, according to Lipper Inc.’s preliminary numbers. These funds were closely followed by loan participation funds, up 1.18% and 9.08% for the month and the year, respectively.
