Within the U.S. large cap space, growth stocks have outperformed value stocks for the three consecutive quarters, with the U.S. stock market ending the third quarter at an all-time high, 2,519.36 as measured by the S&P500®. Investors continue to look past the political turmoil and legislative failures, and focus on the positive economic news including: strong employment, manufacturing growth and modest inflation. Congress appears ready to shift from health care to overhauling the corporate and personal tax system. If passed, this legislation would provide support to the U.S. growth story. We expect the Federal Reserve (Fed) funds rate to increase 25 basis points (0.25%) at the next meeting given the numerous signals the Fed has provided and the market has incorporated this expectation. Late in the quarter oil prices rose above the $50 level supporting the energy sector but it has not negatively affected the economic growth outlook.
The Large Cap Core Fund posted a total return of 4.67% for the quarter, compared with 4.48% for the Fund’s benchmark, the S&P 500® Index. Throughout the year the value factor has been the main headwind to the Fund’s performance as investors have favored expensive securities, especially in the information technology sector. On the other hand, high-quality securities outperformed low-quality securities adding significantly to performance. In addition, investors generally favored high-momentum securities over low-momentum securities. The telecommunications services, healthcare and industrial sectors were the strongest performing sectors, while the consumer discretionary and energy sectors were the weakest. The Fund avoided the weakest securities within the consumer sectors adding to our relative performance; however, stock selection within the utility sector detracted from relative performance.
We expect the outlook for high-quality, inexpensive securities to remain positive in the U.S., given current valuation levels. We also believe the Fund is positioned to benefit from investors looking beyond the broad economic data and refocusing on company fundamentals.
Not FDIC insured | May lose value | No bank guarantee
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