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Equity markets moved sharply higher in the third quarter
Although many cautious investors feared that a pullback would be inevitable heading into September, which historically has been a weak month for the equity markets, the stock market continued to climb a “wall of worry,” pushing its string of positive months to seven in a row. The Russell 3000 Index, a broad proxy for the U.S. equity market, advanced 16.31%, marking the second consecutive quarter of returns in excess of 16%. Value stocks outperformed growth across the market capitalization spectrum. The Russell 1000 Value Index returned 18.24% while the Russell 1000 Growth Index returned 13.97%. Small-cap equities outperformed large-caps. The Russell 2000 Index returned 19.28% while the Russell 1000 Index returned 16.07% for the quarter. Within the benchmark Russell 1000 Index, all sectors posted positive returns for the quarter, led by financial services, materials and industrials.
The debate continues on how long — and to what degree — the rally will continue. Considering the sentiment shift from the worst-case scenarios of bankruptcies and nationalizations to the optimism of green shoots and the possible end of the Great Recession, the market heads into the fourth quarter considerably higher from its lows with an economy eagerly awaiting confirmation that better times could be ahead.
In this environment, Columbia Contrarian Core Fund performed in line with its benchmark, the Russell 1000 Index, and outperformed the average fund in its peer group, the Lipper Equity Income Funds Classification.
Stock selection drove returns1
In the third quarter, JPMorgan Chase and Goldman Sachs in the financials sector, Tyco International in the industrials sector and Apple and Hewlett-Packard in the technology sector were the fund’s top contributors to positive performance. Stock selection in the energy, consumer staples and consumer discretionary sectors also aided the fund return. By contrast, stock selection in industrials and technology hampered performance. On an individual basis, Navistar International, Sprint Nextel, VCA Antech and Corning were the fund’s weakest performers for the quarter.
Outlook
As the economy stabilizes, corporate earnings are poised for a sharp rebound because they will be compared against last year’s sharp decline. Strong efforts by corporate management to cut costs and raise productivity also lift the potential for higher earnings. However, the strong move in stocks since their March lows has already discounted much of this profit rebound. To continue its upward movement, we believe that the market will need to see continued economic improvement over the next 12 months, including a push from the auto and housing sectors. For now, their potential for improvement remains questionable. In this environment, we believe it is prudent to remain flexible in our outlook on the economy and vigilant in monitoring its progress in the months ahead.
Performance data quoted represents past performance, and current performance may be lower or higher. Past performance is no guarantee of future results.
Please read and consider the investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus, which contains this and other important information about the fund, contact your Columbia Management representative or financial advisor or go to www.columbiamanagement.com
The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.
The Russell 1000 Index is an unmanaged index that tracks the performance of 1,000 of the largest U.S. companies based on market capitalization.
The Russell 2000 Index measures the performance of the 2,000 smallest of the 3,000 largest U.S. companies, based on market capitalization. Securities in the fund may not match those in an index.
The Russell 1000 Value Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 1000 Growth Index measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values.
Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. 1Determinations of contributors and detractors are based on performance relative to the fund's benchmark.
Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that the forecasts will come to pass. The views and opinions expressed are those of the portfolio managers and analysts of the affiliated advisors of Columbia Management Group, are subject to change without notice at any time, may not come to pass and may differ from views expressed by other Columbia Management associates or other divisions of Bank of America. These materials are provided for informational purposes only and should not be used or construed as a recommendation of any security or sector.
There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. It should not be assumed that any securities transaction or holdings discussed were or will prove to be profitable, or that the investment recommendations or decisions made in the future will be profitable or will equal the investment performance of the securities discussed herein.
Columbia Management Group, LLC (“Columbia Management”) is the investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and products for institutional and individual investors. Columbia Funds are distributed by Columbia Management Distributors, Inc., member FINRA and SIPC. Columbia Management Distributors, Inc. is part of Columbia Management and an affiliate of Bank of America Corporation. |