U.S. large-cap stocks advanced in the second quarter of 2016. As the period began, global stock markets extended the rally that began in mid-February, lifted by accommodative central bank policies in Europe and Japan and assurances from the U.S. Federal Reserve that it would proceed cautiously in raising interest rates. The UK's vote to leave the European Union on June 23 sparked a global markets rout that briefly pushed major U.S. stock indices into the red for the year, but a subsequent rally erased Brexit-induced losses and generated a slight gain for the quarter. Eight of 10 sectors in the S&P 500 advanced. Energy, telecommunication services, and utilities led advancers, while information technology and consumer discretionary stocks declined. Value stocks outperformed growth across all market capitalizations.
The Equity Income Fund returned 3.93% in the quarter compared with 2.46% for the S&P 500 Index and 3.65% for the Lipper Equity Income Funds Index. For the 12 months ended June 30, 2016, the fund returned 1.28% versus 3.99% for the S&P 500 Index and 3.70% for the Lipper Equity Income Funds Index. The fund's average annual total returns were 1.28%, 9.11%, and 5.82% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 0.66% as of its fiscal year ended December 31, 2015.
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Financials was the largest overweight sector as of quarter-end. Our financial holdings are mostly banks, capital markets companies, and insurers. Financial stocks have rebounded from the 2008 global financial crisis, but we believe that valuations of select companies are still reasonable and that the sector should benefit from the improving economy and a rising interest rate environment. The utilities and industrials and business services sectors were the next largest overweights. Among industrials and business services names, we favor companies that sell to diverse end markets, have solid businesses, and generate strong cash flow. Information technology remained the largest underweight sector.
The U.S. stock market held up surprisingly well in the face of much bad news in the first half of 2016. Risks to our outlook include Brexit's longer-term consequences on economic activity in the UK and Europe, an unforeseen revaluation of China's currency, and a strong U.S. dollar. We expect increased volatility and modest equity returns in the coming months as the investing environment remains driven by geopolitical events. Overall U.S. valuations are slightly above historical averages but appear stretched in traditionally defensive sectors. However, the stock market's crosscurrents continue to provide us with select opportunities to buy quality companies trading at relatively attractive valuations. We have maintained our focus on seeking well-managed companies with strong brands and financial positions that should outperform over time.