U.S. large-cap stocks were little changed in the second quarter as signs of a stronger U.S. economy, a surge in takeover activity, and better-than-expected earnings gave way to uncertainty as Greece lurched closer to a default in June. Expectations that the Federal Reserve would defer a long-awaited interest rate increase until later this year also lifted investor sentiment, easing worries that the improving economy would spur the central bank to speed up the timing of its first rate hike since 2006. The S&P 500 Index rose 0.3% in the second quarter, with five of 10 sectors in the index posting positive returns, led by health care. U.S. gross domestic product contracted slightly in the first quarter, but subsequent readings have led most analysts to forecast modestly positive economic growth in 2015.
The Capital Opportunity Fund returned 0.60% in the quarter compared with 0.28% for the S&P 500 Index and −0.07% for the Lipper Large-Cap Core Funds Index. For the 12 months ended June 30, 2015, the fund returned 7.37% versus 7.42% for the S&P 500 Index and 5.25% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 7.37%, 16.97%, and 7.88% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2015. The fund's expense ratio was 0.70% as of its fiscal year ended December 31, 2014.
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 portfolio aims to outperform the S&P 500 Index by investing in our research analysts' high-conviction stocks while keeping sector and industry weightings in line with those of the index. Six out of 10 sectors in the S&P 500 Index contributed to relative performance in the quarter. Stock selection in consumer discretionary followed by health care contributed the most to relative returns. Conversely, stock selection in industrials and business services detracted the most from relative performance.
The U.S. stock market's strong run since the spring of 2009 has tempered our expectations for continued gains. Given the current environment of subdued economic and earnings growth, rising interest rates, and elevated valuations, we believe that stock returns will likely be more muted in the near term. Uncertainty regarding Greece's future in the eurozone caused volatility to spike at the end of June. While volatility can be hard to stomach for many investors, it also creates opportunities for long-term investors to buy high-quality stocks at cheaper prices. The normalization of monetary policy after more than six years of near-zero rates could mark a return to an environment in which fundamentals become the dominant drivers of the stock market. This kind of environment would allow us to leverage the work of our analysts and affirm the value of our strategy, which relies on rigorous company research to identify favorable long-term opportunities within each sector of the S&P 500.