U.S. stocks recorded stellar gains as major indexes set record highs on improving economic growth and strong corporate profits despite sluggish consumer spending. The U.S. Federal Reserve boosted sentiment when it decided to taper its asset purchases, but only slowly, beginning in January 2014, while Europe's central bank cut its key lending rate. Non-U.S. developed markets stocks turned in good results, though they lagged U.S. shares as the European economy slow emerged from recession. Emerging markets returns were lackluster, but emerging markets bonds logged a positive return. The 10-year Treasury yield reached over 3.00% after the taper announcement, ending the year at 3.03%.
The Spectrum Income Fund returned 1.82% in the quarter compared with −0.14% for the Barclays U.S. Aggregate Bond Index and 1.89% for the Lipper Multi-Sector Income Funds Average. For the 12 months ended December 31, 2013, the fund returned 3.02% versus −2.02% for the Barclays U.S. Aggregate Bond Index and 1.70% for the Lipper Multi-Sector Income Funds Average. The fund's average annual total returns were 3.02%, 9.29%, and 6.01% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2013. The fund's expense ratio was 0.69% as of its fiscal year ended December 31, 2012.
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 Spectrum Income Fund invests for high current income primarily through a range of domestic fixed income classes and quality styles, but can hold income-oriented stocks as well. Non-benchmark diversifying sectors-particularly investments in dividend-paying stocks, high yield bonds, and non-U.S. bonds-bolstered returns as each outperformed the fund's benchmark. Underweighting Treasuries in the fund also supported overall performance as yields rose and prices declined during the period. Our overweight allocation to equities also helped performance. We favor high yield over U.S. investment-grade bonds in this low-yield environment.
Our expectations for global growth remain modest. The U.S. economic recovery continues, supported by a strengthening housing market, improving employment, subdued energy prices, and the Fed's low interest rate policy. While the eurozone has emerged from recession, economic headwinds continue, and Japan's government will continue to face challenges as it attempts to undertake reforms to bolster the country's economy. Emerging markets economies face slower growth than in recent years and remain vulnerable to potential rising U.S. rates. Although uncertainty about the impact of Fed tapering may periodically elevate market volatility, we believe our highly diversified portfolios and diligent fundamental research enhance our ability to produce good long-term returns for our shareholders.