U.S. large-cap stocks advanced in the final quarter of 2015, pushing the S&P 500 Index back into positive territory for the year on a total return (including dividends) basis. Most of the gains occurred in October, and stocks were volatile in the year's final weeks as geopolitical strife and uncertainty over monetary policy weighed on sentiment. The U.S. economic outlook remained bright enough for the Federal Reserve to raise the benchmark fed funds rate on December 16, its first rate hike after seven years of near-zero rates. All sectors in the S&P 500 advanced. Materials rose the most, gaining nearly 10% as a few large mergers offset weak commodity prices. Energy stocks added the least as global oil prices sank to an 11-year low of roughly $37 a barrel.
The Capital Opportunity Fund returned 7.74% in the quarter compared with 7.04% for the S&P 500 Index and 6.17% for the Lipper Large-Cap Core Funds Index. For the 12 months ended December 31, 2015, the fund returned 2.90% versus 1.38% for the S&P 500 Index and −0.67% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 2.90%, 12.48%, and 7.44% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 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 fund 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. Nine out of 10 sectors in the S&P 500 Index contributed to the fund's relative performance in the quarter. Stock selection in industrials, energy, and materials contributed the most to relative returns. Conversely, stock selection in telecommunications detracted the most from relative performance.
The S&P 500 Index ended 2015 up 1.38% including dividends, its smallest total return since 2008 and capping a seventh straight year of gains. Given that the risks facing the global economy have grown from a year ago while valuations are still expensive, our outlook remains cautious. Lower oil prices, dollar strength, and sluggish global growth are expected to continue restraining corporate earnings into 2016. Market volatility surged in the second half of 2015 as worries grew about China's slowdown and the collapse in commodity prices. Those headwinds show no signs of abating in the coming months, and we anticipate heightened volatility will persist. As always, we view volatility as an opportunity to buy fundamentally strong companies at lower prices. We believe that a return to a fundamentals-driven environment favors our investment strategy, which relies on comprehensive company research to identify favorable long-term opportunities in each sector of the S&P 500.