U.S. markets advanced during the quarter as investors seemed to respond favorably to positive U.S. economic data such as the steady improvement in unemployment and the recovery in housing. The S&P 500® Index advanced in the months of April and May but declined in June resulting in an overall quarterly return of 2.91% and a year-to-date return of 13.82%. The broader U.S. market, as measured by the Russell 3000® Index, gained 2.69% for the quarter and 14.06% for the year-to-date period.
From a sector perspective, performance was biased to the upside as six of the nine sectors within the Russell 3000® Index advanced during the quarter. The best performing sectors were consumer discretionary, financial services and healthcare, while the energy, utilities and materials & processing sectors registered negative results for the period.
Companies with higher beta and low P/E characteristics generally outperformed during the quarter. In terms of equity market capitalization, small-cap companies outperformed their large-cap counterparts as the Russell 2000® Index posted a second quarter return of 3.08%, while the Russell 1000® Index advanced 2.65%. From a broad market perspective, style differentiation was evident in the quarter as value-oriented stocks generally outpaced growth-oriented stocks. In the large capitalization segment, the Russell 1000® Value Index and the Russell 1000® Growth Index had quarterly returns of 3.20% and 2.06%, respectively. However, in the mid- and small- capitalization segments, growth-oriented stocks generally outperformed value- oriented stocks.
International equity markets experienced negative results during the period. The MSCI-EAFE Index (Net), a measure of international developed country returns, posted a negative return of -0.98% during the second quarter, bringing its year-to-date return to 4.10%. From a country perspective, only a few markets ended the period in positive territory. Japan was the strongest performer followed by France, Germany and the Netherlands. Australia and New Zealand were the weakest performers and suffered significant declines during the quarter. From a sector perspective, five of the 10 groups generated positive results during the period. Consumer discretionary, healthcare, technology, telecommunications and utilities finished in positive territory, while the remaining sectors posted negative results and lagged the overall market.
Emerging markets were hit harder than developed markets as the MSCI Emerging Markets Index (Net) posted a quarterly return of -8.08%, bringing its year-to-date performance to -9.57%. From a country perspective, most markets were negative and several countries such as Peru, Brazil and Turkey experienced significant double-digit declines. The only positive performers were Hungary, Malaysia and Taiwan. Other than the telecommunications sector, all groups posted negative returns during the second quarter.
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All indices are unmanaged and not available for direct investment. Index performance assumes no taxes, transaction costs, fees or expenses. This update is prepared for general information only and it is not to be reproduced.
GuideStone Capital Management, a controlled affiliate of GuideStone Financial Resources, serves as the investment adviser to GuideStone Funds.