In the final three months of 2015, global equity markets reclaimed some of the ground lost during the third quarter. The MSCI All Country World Index ended the period up 5.15% for the quarter. Markets rallied in October following the sharp declines of September, which outweighed losses in November and December. U.S. stocks rose over the period. The U.S. Federal Reserve raised short-term rates in mid-December, but this widely telegraphed move did not derail the broad equity market. Commodity price weakness continued in the quarter, as did strengthening of the U.S. dollar. Emerging markets equities rose but underperformed the developing market.
The Growth Stock Fund returned 8.60% in the quarter compared with 7.32% for the Russell 1000 Growth Index and 8.23% for the Lipper Large-Cap Growth Funds Index. For the 12 months ended December 31, 2015, the fund returned 10.85% versus 5.67% for the Russell 1000 Growth Index and 5.61% for the Lipper Large-Cap Growth Funds Index. The fund's average annual total returns were 10.85%, 14.61%, and 9.18% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. The fund's expense ratio was 0.68% as of its fiscal year ended December 31, 2014.
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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.
While the portfolio has an overweight allocation to emerging markets, there is little to no exposure to markets tied to energy and commodities in order to focus on faster-growing, demographically driven economies with a rising middle class, low debt, and an increasing cap that represents almost one-quarter of total net assets . We have been finding more companies that can substantially increase their earnings in developing countries than in developed markets. We are underweight the U.S., where valuations tend to be higher than in other regions, and Japan, where we think that poor corporate governance and slowness in implementing structural reforms will restrain returns. Although our overarching philosophy is to be sector-neutral versus the benchmark, our bottom-up fundamental analysis of stocks can result in some overweights or underweights. We increased the portfolio's underweight allocation to the energy sector due to the negative outlook for oil prices.
With increasing gross domestic product, decreasing unemployment, and still near-record low interest rates, we retain a favorable view on the U.S. economy. We have seen pockets of strength in consumer spending and a robust recovery in the housing market, with underlying fundamentals outside of energy-related sectors remaining solid. Falling manufacturing output and the effects of a strong U.S. dollar on corporate profits remain risks that we continue to monitor. We will continue to concentrate on buying high-quality companies selling at reasonable valuations regardless of where they are based.