Financial funds shine! Lower rates ahead?

Financial sector mutual funds were the best performers for July with 8 funds in the Top 25 as listed at The Vancouver Sun website. The strong showing by financial services funds could be an indication that lower interest rates are on the way. Or at least an end to the series of rate hikes we've seen in the last year.

This is borne out by the Power Index in the Cabot Market Letter of August 11th. This index compares current short-term rates with those of six months ago. The current reading of 0.92 shows that short-term Treasury notes are yielding 8% less today. The writers, Carlton and Timothy Lutz, note that the NYSE Financial Index appears ready to break out to a new all-time high for the first time since April 1998.

Other funds making the Top 25 include 4 US and 6 Canadian equity funds, 3 international equity funds, 2 real estate funds and 2 specialty funds.

Rank	Fund	Type	1 Month	3 Month	1 Year
1	Friedberg International Securities Fund	International	14.13%	-6.52%	8.90%
2	AGF Managed Futures Value Fund	Specialty	12.03%	23.95%	35.27%
3	Navigator Asia-Pacific Fund	International	10.91%	21.95%	8.56%
4	Optima Strategy Real Estate Investment Pool	Real Estate	10.26%	15.06%	20.78%
5	Fidelity Focus Financial Services Fund	Financial	8.36%	9.80%	0.71%
6	Fidelity RSP Focus Financial Services Fund	Financial	8.19%	9.44%	n/a
7	Fidelity Focus Financial Services Fund U$	Financial	7.87%	9.33%	2.03%
8	AIC RSP American Advantage Fund	Financial	7.75%	11.29%	18.17%
9	AIC American Advantage Fund	Financial	7.73%	11.47%	18.75%
10	AIC American Advantage Seg Fund 75% Guarantee	Financial	7.68%	11.09%	17.51%

But while financial and equity funds dominate the month, the gains aren't some of the gangbusters we've seen in the past in sectors like technology. And, in fact, the number of Power Performers dropped in July from 58 in June to just 39. Of these, 21 were Super Power Performers, returning better than 25% for each of the one year, three year and five year periods.

All but one of the Super Power Performers were negative for July and all but three were negative for the last three months. The regular Power Performers were stronger, particularly Canadian equity funds, which were all strong three month performers. Four out of five of these were also positive for the one month period.

GlobeFund - Canada's premier mutual fund site. Part of the Thomson Financial media group.
The Fund Library - Another superb resource for Canadian mutual fund investors.
The Fund Counsel - Economists Levi Folk and Richard Webb run this excellent site.
Morningstar Canada - Formerly Portfolio Analytics, this is another superb Canadian mutual fund resource.
U.S. Mutual Funds - About Guide Marlene Dziegeleski steers you through the world of US mutual funds.

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