U.S. stocks rallied in the first quarter as the recovery picked up despite tighter fiscal policy and fears about a banking sector collapse in Cyprus abated. The broad-based S&P 500 Index ended the period at a fresh record high, effectively recouping all of its losses since the 2008-2009 financial crisis. Rising corporate earnings and the Federal Reserve's ongoing efforts to stimulate growth through its asset purchase plan helped drive the rally, offsetting concerns about the latest flare-up of the eurozone debt crisis in Cyprus. Most indicators showed the U.S. economy getting stronger. Weekly jobless claims and the unemployment rate both fell to multiyear lows, while gauges of manufacturing and service sector activity were generally favorable. Further evidence showed that the housing market had turned a long-awaited corner as home prices, sales, and construction activity all rose.
The Equity Index 500 Fund returned 10.55% in the quarter compared with 10.61% for the S&P 500 Index and 10.52% for the Lipper S&P 500 Objective Funds Index. For the 12 months ended March 31, 2013, the fund returned 13.69% versus 13.96% for the S&P 500 Index and 13.66% for the Lipper S&P 500 Objective Funds Index. The fund's average annual total returns were 13.69%, 5.60%, and 8.26% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2013. The fund's expense ratio was 0.30% as of its fiscal year ended December 31, 2011.
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.
Benchmark Definitions
The portfolio seeks to provide broad exposure to large-cap U.S. stocks by replicating the structure of the S&P 500 Index. All sectors rose for the quarter, and most posted double-digit returns. Health care and consumer staples were the top-performing sectors in the S&P 500. These sectors benefited from their defensive nature as investors favored companies with stable dividends and noncyclical businesses. Information technology and materials were the worst-performing sectors for the quarter, with each returning less than 5%.
Given the strong rally of recent months, we would not be surprised to see a pullback in the near term. However, many of the risks facing stock investors have eased, aided by the European Central Bank's forceful actions to contain the region's debt crisis and highly accommodative monetary policies around the globe. In the U.S., the economic recovery appears to be gaining traction, while corporate fundamentals remain strong. Near-term risks to domestic growth include mandatory budget cuts under the federal sequester, which will likely dampen economic activity in the coming months. However, we believe that continued resilience in the private sector will help blunt the impact of fiscal tightening.
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