U.S. stocks gained modestly as stabilizing oil prices and monetary stimulus overseas overrode concerns about impending U.S. interest rate hikes, a stronger dollar, and mixed domestic economic data. Stocks in Europe and Japan rose amid signs of renewed economic growth, but the stronger greenback weighed on dollar-based returns. Emerging markets stocks advanced overall, but performance varied between countries as commodity importers outpaced commodity exporters. U.S. bonds posted good overall returns amid low inflation and modest economic growth. Longer-maturity U.S. Treasuries fared well as long-term rates fell and overseas demand rose. Non-U.S. developed market debt fell in U.S. dollar terms, while emerging markets bonds were mixed.
The Target Retirement 2020 Fund returned 2.10% in the quarter compared with 2.34% for the S&P Target Date 2020 Index. For the 12 months ended March 31, 2015, the fund returned 5.31% versus 6.43% for the S&P Target Date 2020 Index. The fund's 1-year and Since Inception (08/20/2013) average annual total returns were 5.31% and 8.91%, respectively, as of March 31, 2015. The fund's expense ratio was 0.65% as of its fiscal year ended May 31, 2014.
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We have a neutral position in stocks relative to bonds. The risk/return profile for equities now appears more evenly balanced at current valuations, with less expected upside support from multiple expansion and with margins at peak levels. We expect modest returns from bonds as the current low-yield environment offers a weak foundation, and rising rates should be an additional headwind assuming interest rates begin to normalize. We favor emerging markets stocks over developed markets, but we are selective as declining energy and commodity prices could widen the performance gap between developing economies. We increased our overweight to high yield relative to investment-grade bonds based on their attractive yields and less sensitivity to rising rates.
We expect modest global economic growth over the next few quarters. The U.S. economy should grow at a modest 3% annualized rate in 2015 as low energy costs and an improving labor market support consumer spending. Monetary policy remains broadly accommodative, with interest rate hikes not expected before mid- to late 2015. In Europe, equity valuations are attractive, particularly if the region's economy starts growing again and earnings normalize. Japanese stocks are trading well below pre-financial crisis levels, and profit margins have room to expand if the global economy improves. Emerging markets stocks are priced below historical averages, but there is a wide variation between inexpensive but challenged cyclical shares and expensive higher-quality growth shares.