U.S. stocks rose in the first quarter of 2015 despite occasional bouts of risk aversion and volatility and uncertainty about when the Federal Reserve may begin tightening its monetary policy. The market was supported by corporate merger activity, reduced energy costs, and low interest rates. Most major U.S. indexes established new all-time highs in March. Mid- and small-cap shares strongly outperformed their larger peers. That performance was due in part to smaller-caps having lower exposure to foreign markets, which have become more challenging because of the strong U.S. dollar.
The Extended Equity Market Index Fund returned 5.24% in the quarter compared with 5.30% for the S&P Completion Index and 4.03% for the Lipper Mid-Cap Core Funds Index. For the 12 months ended March 31, 2015, the fund returned 10.38% versus 10.15% for the S&P Completion Index and 10.12% for the Lipper Mid-Cap Core Funds Index. The fund's average annual total returns were 10.38%, 16.08%, and 10.17% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2015. The fund's expense ratio was 0.45% as of its fiscal year ended December 31, 2013.
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 tracks the Standard & Poor's Completion Index, which offers investors exposure to small- and mid-cap U.S. stocks. Only three sectors outperformed the wider index for the quarter. Health care, among the largest sector allocations, generated an excellent return of more than 14%. Information technology, which is also a large sector, solidly outperformed the broader market, as did the telecommunication services sector. Consumer discretionary, consumer staples, industrials and business services, financials, energy, and materials shares saw more modest gains. The utilities sector was the only decliner as the market favored growth rather than value stocks.
The U.S. economic recovery appears to be on a relatively firm footing and should benefit from stable growth driven by labor market strength and reduced fiscal headwinds. Inflation remains contained, helped by low energy prices, and the Federal Reserve is on course to begin monetary tightening later this year, which we view as indicative of growing confidence in the economy. Healthy corporate balance sheets and cash flows offer companies the flexibility to increase hiring, enhance merger and acquisition activity, and return capital to shareholders. However, smaller-cap stocks may be challenged as the first-quarter rally puts the asset class close to extreme valuation levels. Nevertheless, shareholders should note that we do not make investment decisions based on market forecasts or prospects for individual companies.