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. Real assets stocks advanced as prices for many natural resources rallied. U.S. investment-grade bonds rose as Treasuries rallied, driven by sluggish global growth, accommodative monetary policies worldwide, and expectations of fewer Federal Reserve interest rate increases this year than anticipated. High yield bonds advanced as commodity prices rebounded.
The Balanced Fund returned 1.27% in the quarter compared with 1.99% for the Lipper Balanced Funds Index. For the 12 months ended June 30, 2016, the fund returned −0.41% versus 1.49% for the Lipper Balanced Funds Index. The fund's average annual total returns were −0.41%, 7.20%, and 6.21% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 0.68% 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.
Total return information before August 31, 1992 reflects performance by managers other than T. Rowe Price.
We favor international over U.S. stocks, although we reduced our international stocks overweight in June to reflect the impact of our reduced global growth expectations on lower earnings growth. The Brexit vote will likely weigh on consumer and corporate spending in Europe as well as its trading partners, and has raised the prospect that other member countries will seek to exit the bloc. Among U.S. equities, we have a modest overweight to growth stocks over value. Growth stocks feature more attractive valuations and should benefit more from expectations for a protracted period of low economic growth.
We expect global economic growth to be modest and uneven. Developed markets are expanding modestly, while major emerging markets are hampered by weak global growth. The Federal Reserve has adopted a "low and slow" approach to interest rate hikes, and their timing may be further affected as they evaluate Brexit's impact. Key risks to global markets include Brexit's uncertain impact and divergent global monetary policies, including the potentially adverse consequences of negative interest rates and currency volatility. Political and policy uncertainties in many countries pose additional concerns. However, we believe that broad diversification and our ability to make tactical changes in our allocations should help us generate attractive risk-adjusted returns in an uncertain market environment.