U.S. stocks generally rose in the second quarter. Markets registered moderate gains in April and May, supported by accommodative global monetary policies, stabilizing oil prices, and reduced expectations for interest rate hikes in the U.S. Markets tumbled in late June after the UK surprisingly voted to leave the European Union (Brexit). International developed markets stocks declined moderately, while emerging markets stocks rose slightly overall. Energy stocks were particularly strong, rallying as oil prices reached and hovered around $50 per barrel. High yield bonds decisively surpassed higher-quality securities, as credit spreads narrowed and energy and metals and mining issues rallied with commodity prices.
The New Era Fund returned 8.08% in the quarter compared with 13.02% for the Lipper Global Natural Resources Funds Index and 2.46% for the S&P 500 Index. For the 12 months ended June 30, 2016, the fund returned −1.50% versus −3.06% for the Lipper Global Natural Resources Funds Index and 3.99% for the S&P 500 Index. The fund's average annual total returns were −1.50%, −2.59%, and 1.60% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 0.67% as of its fiscal year ended December 31, 2015.
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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.
Although the opportunity set in the natural resources space has narrowed as commodities prices trend lower over time and balance sheets are pressured, we are still finding pockets of opportunity in several areas of the market. These include major and integrated petroleum companies with clean balance sheets and a significant number of financial and operating levers to pull. We also like commodity-related companies that stand to benefit from declining input costs and growing demand from end markets, including specialty chemicals and packaging. Overall, we favor companies with lower financial leverage and no hidden counterparty risk, given the presence of wide credit spreads and bankruptcy potential in the commodities marketplace.
We continue to believe that the global commodities market is in the initial years of a long-term secular down cycle, although there will be periods of cyclical disruption. Although some market participants expect a return to higher prices, we expect oil prices to settle into a new long-term average in the $40 to $50 per barrel range. We note, however, that this ultimately depends on the degree to which technological innovation continues to improve productivity and drive down costs. We remain committed to our bottom-up stock selection process and our philosophy of buying and holding a diverse selection of fundamentally sound natural resources companies with solid balance sheets and talented management.