Despite generally favorable domestic economic data, U.S. stocks declined in the third quarter amid concerns about China's economy and the timing of Federal Reserve rate hikes. Large-cap indexes experienced their first correction in four years. Evidence of China's decelerating economy and its unexpected currency devaluation sparked a sharp sell-off in Chinese stocks, which weighed on global equity markets and commodity prices and fueled demand for safe-haven assets, such as the U.S. dollar and U.S. Treasuries. Even though the Fed failed to raise short-term U.S. interest rates, the central bank's mid-September concerns about "global economic and financial developments" weighed on world markets as the quarter ended. Large-cap shares held up better than mid- and small-caps. Growth stocks led value stocks among large-caps, while the opposite held among small-caps. Mid-cap growth and value shares fared about the same.
The Equity Index 500 Fund returned −6.50% in the quarter compared with −6.44% for the S&P 500 Index and −6.50% for the Lipper S&P 500 Funds Index. For the 12 months ended September 30, 2015, the fund returned −0.85% versus −0.61% for the S&P 500 Index and −0.89% for the Lipper S&P 500 Funds Index. The fund's average annual total returns were −0.85%, 13.04%, and 6.54% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.27% 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 Equity Index 500 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 seeks to provide broad exposure to large-cap U.S. stocks by replicating the structure and performance of the Standard & Poor's 500 Index. Nine of the 10 sectors in the index posted negative returns for the quarter with only the utilities sector eking out a small gain. The energy, materials, and health care sectors performed the worst.
The U.S. stock market's third-quarter loss is not surprising given the magnitude of its advancement over the past six years. In the near term, we expect to see muted equity returns coupled with higher volatility, which has lately created more opportunities to buy high-quality companies at cheaper prices. Valuations in large-cap stocks are now trading closer to their historical averages.