Most major U.S. stock indexes rose in the second quarter after recovering steep losses late in the period following the UK referendum on June 23 to leave the European Union. Mid- and small-cap shares outperformed their large-cap counterparts. While the U.S. economy grew at a sluggish 1.1% annual rate in the first quarter of the year, preliminary data pointed to a pickup in the second quarter. Although the pace has slowed recently, jobs growth averaged 200,000 per month over the 12 months through the end of June, and the national unemployment rate was 4.7% in May, its lowest level in more than eight years.
The Capital Opportunity Fund returned 2.32% in the quarter compared with 2.46% for the S&P 500 Index and 2.14% for the Lipper Large-Cap Core Funds Index. For the 12 months ended June 30, 2016, the fund returned 3.48% versus 3.99% for the S&P 500 Index and 1.52% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 3.48%, 11.81%, and 7.45% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 0.70% as of its fiscal year ended December 31, 2015.
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.
Our investment strategy relies on comprehensive fundamental research to identify favorable long-term opportunities in each sector of the S&P 500 Index. The fund aims to outperform the index by investing in our research analysts' high-conviction stocks while keeping sector and industry weightings in line with those of the benchmark. Five out of 10 sectors in the S&P 500 Index contributed to the fund's relative performance in the quarter. Stock selection in the consumer discretionary and materials sectors contributed the most to relative performance. Conversely, stock selection in industrials and energy detracted the most from relative returns.
U.S. stock valuations are slightly higher than their long-term averages but below levels that we would deem overly expensive, especially compared with bond valuations. Economic growth is slow but durable. While corporate leverage has increased, balance sheets, outside energy-related sectors, remain broadly healthy. We continue to expect a choppy environment for U.S. stocks for the rest of 2016 as investors alternately focus on the positive and negative forces driving the market. Geopolitical events will likely have a large impact on financial markets in the coming months.