U.S. stocks enjoyed strong gains in the third quarter. Buoyed by hopes for continued monetary stimulus and a rebound in the global economy, investors bid up stocks despite slowing profit growth. The Federal Reserve played a strong role in bolstering sentiment in the third quarter. Indeed, quelling fears of an early taper, the Fed surprised most observers by deciding to delay tapering its purchases of long-term securities, which has helped limit the rise in long-term rates as the economy has improved. However, as the period ended, a showdown over the budget ensued, and rankling over the debt ceiling loomed. Most of the major stock indexes moved into record territory before pulling back toward the end of the period amid concerns about the underlying strength of the U.S. economy and the growing probability of an October 1 federal government shutdown.
The Total Equity Market Index Fund returned 6.38% in the quarter compared with 6.16% for the S&P Total Market Index and 6.95% for the Lipper Multi-Cap Core Funds Index. For the 12 months ended September 30, 2013, the fund returned 21.80% versus 21.46% for the S&P Total Market Index and 23.15% for the Lipper Multi-Cap Core Funds Index. The fund's average annual total returns were 21.80%, 10.53%, and 8.14% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2013. The fund's expense ratio was 0.36% as of its fiscal year ended June 1, 2013.
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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 Total 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 provides investors exposure to the entire U.S. stock market by seeking to track the S&P Total Market Index. Materials was the best performer in the index this quarter on rebounding precious metals prices. Industrials and business services, health care, information technology, and consumer discretionary also delivered strong results. Energy was flat, while financials, consumer staples, and utilities eked out positive numbers. Telecommunication services delivered a negative return.
While monetary policy has always played an important role in driving markets, recent months have seen investors paying exceptional attention to signals coming from the central bank. T. Rowe Price managers note that, as the Fed eventually gets closer to winding down its stimulus, fundamental factors, such as corporate earnings and cash flow, should become more important. They also note that unemployment has declined sharply and continues to, housing prices and sales have rebounded, and investor sentiment improved as corporate earnings recovered.