Most major U.S. stock indexes rose strongly and reached all-time highs in the fourth quarter, as the economy strengthened and the national unemployment rate decreased to 7%. Equities shrugged off a federal government shutdown and debt ceiling showdown in October. Large-cap shares outperformed their smaller counterparts. Value stocks narrowly outperformed growth stocks among small- and mid-caps, while large-cap growth stocks fared marginally better than large-cap value shares. In the large-cap universe, all sectors produced positive returns.
The U.S. Large-Cap Core Fund returned 10.18% in the quarter compared with 10.51% for the S&P 500 Index and 9.52% for the Lipper Large-Cap Core Funds Index. For the 12 months ended December 31, 2013, the fund returned 31.78% versus 32.39% for the S&P 500 Index and 31.82% for the Lipper Large-Cap Core Funds Index. The fund's 1-year and Since Inception (06/26/2009) average annual total returns were 31.78% and 18.36%, respectively, as of December 31, 2013. The fund's expense ratio was 1.33% as of its fiscal year ended December 31, 2012.
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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 stock selection in the health care and consumer discretionary sectors contributed to fund results in the fourth quarter, and our stock selection and relatively low exposure to energy was also beneficial. On a negative note, our consumer staples and information technology holdings, as well as a low allocation to the latter group, were disappointing. We were net sellers of information technology and health care positions during the fourth quarter, and we added to key financial, utilities, and industrials and business services stocks.
We are reasonably optimistic about the prospects for equities in 2014. The negative effects of the tax hike are well behind us, inflation remains contained, energy prices have fallen, and U.S. economic growth is progressing moderately. The geopolitical and domestic risks remain. We are particularly concerned about the ongoing wars in the Middle East and the condition of China's banking system. Domestically, the onset of the Federal Reserve's tapering of its monthly asset purchases is worrisome, although we believe it will be positive longer term. The expansion of price/earnings multiples that drove stocks higher last year is likely to moderate, and earnings growth will likely continue at a modest pace. Stock prices are not yet overvalued, and we are still able to find good companies with solid fundamentals that lagged the market in 2013 in our search for our portfolio investments.