U.S. stocks recorded stellar gains in the fourth quarter as major indexes set record highs on improving economics and strong corporate profits despite sluggish consumer spending. The Federal Reserve also boosted sentiment when it announced that in January 2014 it would begin tapering its asset purchases, which have kept long-term interest rates low and helped spur demand for equities. Waning fiscal headwinds also encouraged economic activity, investor sentiment, and markets as a deadlock over the budget resulting in a partial government shutdown gave way to a longer-term agreement.
The Extended Equity Market Index Fund returned 8.38% in the quarter compared with 8.53% for the S&P Completion Index and 8.69% for the Lipper Mid-Cap Core Funds Index. For the 12 months ended December 31, 2013, the fund returned 38.37% versus 38.24% for the S&P Completion Index and 35.04% for the Lipper Mid-Cap Core Funds Index. The fund's average annual total returns were 38.37%, 22.55%, and 10.30% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2013. The fund's expense ratio was 0.44% as of its fiscal year ended December 31, 2012.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The Extended Equity Market Index Fund charges a 0.5%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
The portfolio offers investors exposure to small- and mid-cap U.S. stocks by seeking to track the S&P Completion Index. Telecommunications services was by far the best performer for the quarter, followed by industrials and materials, which also outpaced the index. Consumer discretionary, health care, consumer staples, and information technology delivered returns in line with the benchmark. Financials produced a good return but lagged moderately, while utilities and energy achieved more modest results.
T. Rowe Price managers observe that high corporate cash levels might help strengthen the recovery in 2014, especially if companies increase capital spending. Corporations could also devote some of their cash to mergers and acquisitions, which would provide less of a direct economic benefit but help support stock prices. They caution, however, that a better economic environment does not guarantee superior stock market performance, and they would not be surprised to see stock gains moderate in the coming year.