U.S. stocks rose in the second quarter of 2014, adding to first-quarter gains and lifting large-cap indexes to new all-time highs in June. Equities climbed amid signs that the economy was recovering from the weather-driven economic contraction in the first quarter. Corporate merger activity was supportive, and signs that Russia wants to de-escalate tensions with Ukraine-whose eastern region is experiencing violent separatism-were encouraging. Investors were undeterred by the Federal Reserve's continued tapering of its asset purchases or by rising oil prices late in the quarter in response to a sharp increase in sectarian violence in Iraq.
The U.S. Large-Cap Core Fund returned 4.75% in the quarter compared with 5.23% for the S&P 500 Index and 4.51% for the Lipper Large-Cap Core Funds Index. For the 12 months ended June 30, 2014, the fund returned 23.47% versus 24.61% for the S&P 500 Index and 23.38% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 23.47%, 17.86%, and 17.84% for the 1-, 5-, and Since Inception (06/26/2009) periods, respectively, as of June 30, 2014. The fund's expense ratio was 1.15% as of its fiscal year ended December 31, 2013.
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Our stock selection and overweight position in utilities drove fund performance during the quarter. Our information technology and health care holdings also boosted results-along with an overweight in the latter sector. On a negative note, our positions in financials, consumer discretionary, and industrials and business services trimmed fund performance. We were also overweight in the industrials and business services sector, which constrained results during the period. The portfolio remains positioned across a broad array of sectors and industries, a result of our bottom-up approach to stock selection.
We don't expect to see a repeat of the expansion in price/earnings multiples that drove stocks last year. Stocks are more likely to be influenced by corporate earnings growth, which we think will continue at a moderate pace through the rest of the year. Valuations are reasonable from a historical perspective, and stock market performance should be more or less in line with the rate of earnings growth. Merger-and-acquisition activity has been increasing, largely for technical and tax-related reasons, which has been beneficial for stocks. Our major concerns remain to be slowing growth in China and the eruption of violence in the Middle East and other regions, all of which have the potential to derail the capital markets. So far, equities have managed to reach new highs in the face of the instability.