The major large-cap indexes ground their way to several all-time highs during the third quarter, despite ongoing geopolitical tensions in the Middle East and Ukraine and the Fed's tapering of its asset purchase program. The advance was supported by generally favorable U.S. economic data, better-than-expected earnings growth, and solid corporate fundamentals. Mid- and small-cap stocks stumbled, however, due to concerns about above-average valuations following several years of robust returns.
The Total Equity Market Index Fund returned −0.13% in the quarter compared with −0.06% for the S&P Total Market Index and −0.84% for the Lipper Multi-Cap Core Funds Index. For the 12 months ended September 30, 2014, the fund returned 17.48% versus 17.67% for the S&P Total Market Index and 15.37% for the Lipper Multi-Cap Core Funds Index. The fund's average annual total returns were 17.48%, 15.61%, and 8.43% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2014. The fund's expense ratio was 0.35% 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 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 tracking the Standard & Poor's Total Market Index, which includes large-, mid-, small-, and micro-cap companies. The portfolio's performance was mixed as only half the sectors in the benchmark posted positive returns. Health care, the second-largest sector allocation, advanced the most, returning nearly 5%. Information technology, telecommunication services, consumer staples, and financials also generated positive, albeit less-robust, returns. The energy sector was the poorest performer, falling more than 9% as oil prices fell and supply disruption fears were not realized. The consumer discretionary, materials, industrials and business services, and utilities sectors posted smaller losses.
We anticipate moderate U.S. economic growth and low inflation in the months ahead. Interest rates are likely to rise next year, but we believe they will occur at a modest pace, which would not derail our long-term growth projections. We believe that stock performance will likely track corporate earnings growth. In our view, price/earnings multiples, or how much investors are willing to pay for a dollar of those earnings, are neither overly expensive nor undervalued at this time. However, on a relative and historical basis, small-cap stocks appear expensive compared with large-caps. While we do not make investment decisions based on market forecasts or the prospects for individual companies, we would not be surprised to see a 10% to 15% correction after a multiyear stretch without one.