U.S. stocks were generally flat during the second quarter of 2015, as the strengthening economy and better-than-expected corporate earnings collided with renewed concerns over the worsening Greek debt crisis and turmoil in Chinese markets. Small-cap stocks narrowly outpaced large-caps, while mid-caps were the laggards. Investors continued to bid up growth-oriented areas, particularly among small-caps, which led value stocks by about 3% during the period. Information technology and health care, especially in the biotechnology industry, generated strong returns.
The Small-Cap Stock Fund returned −0.80% in the quarter compared with 0.42% for the Russell 2000 Index and 1.71% for the Lipper Small-Cap Growth Funds Index. For the 12 months ended June 30, 2015, the fund returned 5.67% versus 6.49% for the Russell 2000 Index and 9.63% for the Lipper Small-Cap Growth Funds Index. The fund's average annual total returns were 5.67%, 18.84%, and 10.25% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2015. The fund's expense ratio was 0.91% as of its fiscal year ended December 31, 2014.
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Total return information before August 31, 1992 reflects performance by managers other than T. Rowe Price.
Our sector positions did not change dramatically during the second quarter. We have a large overweight versus our benchmark in industrials and business services through exposure to commercial services, road and rails, and machinery. However, we reduced holdings in late-cycle businesses due to pricing pressure. Financials represents the fund's largest sector weight, and we slightly increased the allocation through purchases of regional banks, insurance, and real estate investment trusts. We reduced our exposure to consumer discretionary due to the elimination of several large sales following their strong performance. Our allocation to information technology and health care, while large, remains below the benchmark, as we are finding fewer opportunities in this area of the market and we trimmed several holdings whose market capitalization increased.
The current bull market has been lengthy by historical standards, and while we remain cautiously optimistic, recent sideways market behavior is a reminder that the tailwind of a bull market will not persist indefinitely. Following three consecutive quarters of outperformance versus large-caps, small-cap valuations remain high on an absolute basis, in our view. For that reason, a market pullback would likely affect small-caps more than large-caps. We are mindful of valuation metrics as we continue to seek out durable growth and value companies that should benefit from improving economic conditions.