U.S. stocks generally rose in the second quarter. Markets registered moderate gains in April and May, supported by accommodative global monetary policies, stabilizing oil prices, and reduced expectations for interest rate hikes in the U.S. Markets tumbled in late June after the UK surprisingly voted to leave the European Union (Brexit). International developed markets stocks declined moderately, while emerging markets stocks rose slightly overall. U.S. investment-grade bonds advanced as Treasuries rallied. High yield bonds advanced as commodity prices rebounded. Bonds in developed and emerging international markets advanced strongly.
The Retirement I 2005 Fund - I Class returned 2.21% in the quarter compared with 1.81% for the Combined Index Portfolio - Retirement 2005 Broad Index. The Since Inception (09/29/2015) total return was 7.25% as of June 30, 2016. The fund's expense ratio was 0.78% as of the most recent Prospectus.
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.
We have a neutral position in stocks versus bonds. Equity valuations appear reasonable overall, but they remain above historical averages despite recent volatility, with less support from soft profits and earnings growth. A low-yield environment sets a weak foundation for bonds, and rising interest rates could be a headwind. We favor U.S. large-cap stocks over U.S. small-caps as relative valuations approach their long-term historical average, but market volatility and softer earnings growth expectations pose risks to small-caps. We pared our overweight to high yield bonds versus U.S. investment-grade debt back to neutral as the current credit cycle appears to be aging due to increasing leverage, weakening profits, and rising defaults.
We expect global economic growth to be modest and uneven. Developed markets are expanding modestly, while major emerging markets are hampered by weak global growth. The Federal Reserve has adopted a "low and slow" approach to interest rate hikes, and their timing may be further affected as they evaluate Brexit's impact. Key risks to global markets include Brexit's uncertain impact and divergent global monetary policies, including the potentially adverse consequences of negative interest rates and currency volatility. Political and policy uncertainties in many countries pose additional concerns. However, we believe that broad diversification and our ability to make tactical changes in our allocations should help us generate attractive risk-adjusted returns in an uncertain market environment.