The major large-cap U.S. indexes continued grinding their way to new all-time highs for most of the third quarter, despite geopolitical tensions in the Middle East and Ukraine and the Fed's tapering of its asset purchases. The advance was supported by generally favorable U.S. economic data, robust earnings gains that exceeded expectations, and solid corporate fundamentals.
The Equity Index 500 Fund returned 1.06% in the quarter compared with 1.13% for the S&P 500 Index and 1.05% for the Lipper S&P 500 Funds Index. For the 12 months ended September 30, 2014, the fund returned 19.39% versus 19.73% for the S&P 500 Index and 19.39% for the Lipper S&P 500 Funds Index. The fund's average annual total returns were 19.39%, 15.39%, and 7.84% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2014. The fund's expense ratio was 0.28% as of its fiscal year ended December 31, 2013.
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. Sector performance during the third quarter was mixed. Based on total return data, health care, financials, and information technology stocks, the largest allocations in the benchmark, generated solid gains. The telecommunication services and consumer staples sectors also produced gains and outperformed the broad market. Consumer discretionary and materials stocks were little changed over the three-month period. The energy sector fell sharply, surrendering a significant portion of its second-quarter gains, as oil prices fell and supply disruption fears were not realized. Utilities and industrials and business services stocks fell to a lesser degree.
We anticipate moderate U.S. economic growth and low inflation in the months ahead. Interest rates are likely to rise next year at a modest pace, which would not derail our long-term growth projections. We believe that stocks will continue to track the performance of corporate earnings growth. In our view, price/earnings multiples, or how much investors are willing to pay for a dollar of those earnings, are neither overly expensive nor undervalued at this time. While we do not make investment decisions based on market forecasts or prospects for individual companies, we would not be surprised to see a 10% to 15% correction after a multiyear stretch without one.