The broad market, measured by the S&P 500 Index, was virtually flat during the second quarter of 2015 and through the year to date, resulting in its weakest first half since 2010. Stocks sputtered to a close as the Federal Reserve signaled its intention to raise short-term interest rates sometime this year, should conditions warrant such a move. Turmoil in Greece and, more significantly in China, added to equities' lackluster performance. Large-cap growth stocks slightly outperformed large-cap value shares, propelled by strength in the health care sector.
The U.S. Large-Cap Core Fund returned 1.15% in the quarter compared with 0.28% for the S&P 500 Index and −0.07% for the Lipper Large-Cap Core Funds Index. For the 12 months ended June 30, 2015, the fund returned 9.69% versus 7.42% for the S&P 500 Index and 5.25% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 9.69%, 17.59%, and 16.45% for the 1-, 5-, and Since Inception (06/26/2009) periods, respectively, as of June 30, 2015. The fund's expense ratio was 1.15% 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.
Our financial holdings contributed most to fund performance during the period, advancing on anticipation of higher interest rates in the coming months. Consumer staples was another strong area, with good support from several key holdings with good fundamentals. Our positions in information technology were disappointing during the quarter, as they lost ground because of weakness in the personal computer space and missed first-quarter earnings projections. The consumer discretionary sector performed well overall, but our underweight allocation trimmed portfolio results. One of our major positions failed to deliver on anticipated earnings growth during the period. Our largest overweight is in industrials and business services, where we added to a couple of portfolio stocks. Health care remains another area in which we see good potential.
U.S. economic growth remains tepid, and the energy sector will continue to be a drag on the economy in the coming months. Stock valuations, while not inordinately high, are at the upper end of their historical price/earnings ranges. We expect corporate earnings growth to be lackluster through the remainder of the year, which could preclude a significant stock market rebound from its first-half performance. The major tailwinds that could benefit investors going forward are the ongoing low interest rate environment, reflecting the slow growth environment and moderate inflation. Even if the Federal Reserve starts to raise short-term rates by year-end, the pace of monetary tightening is likely to be measured, with a series of small incremental increases. In addition, the strength of the dollar may have peaked, which would make U.S. exports more affordable for foreign consumers.