Market Sector Update

• The Federal Reserve (Fed) struck a move dovish tone in its June policy statement abandoning the word “patient” and leading some market participants to interpret that a case for easing monetary policy had strengthened.
• The Fed acknowledged that it has been grappling with a consistent shortfall in inflation relative to its 2% target – the Fed’s preferred inflation gauge, the core personal consumption expenditures index, was up 1.5% in May following April’s reading of 1.6%.
• Corporate spreads experienced a roller-coaster quarter – average option-adjusted spread of U.S. investment grade corporate bonds tightened 10 basis points (bps) in April, widened 22 bps in May and then reversed again in June to end the quarter 3 bps tighter overall.
• Total issuance of investment grade corporate bonds for the period was down approximately 20% in year-to-year comparison for 2018 and the lowest second quarter issuance since 2013.

Portfolio Strategy

• A passively managed index fund, the Fund delivered a positive return for the quarter, with long-duration bonds outperforming shorter-dated bonds and BBB issues besting higher-rated credits.
• Given the market’s expectation for further rate hikes, all eleven sectors were positive for the quarter. Consumer discretionary and communication services were the top performers, however all sectors posted some of the highest quarterly returns in the past four years.
• After widening for much of May, spreads finished the quarter modestly tighter than they ended the prior quarter. BBBrated credits performed best with spreads tightening 23 bps in June.

Outlook

• The Fed has committed to take the appropriate steps in order to sustain the current economic expansion – markets are currently pricing in two rate cuts by the end of the year.
• Geopolitical risks and the ongoing impact of tariffs continue to pose concerns for global economic growth. As a result, eurozone bond yields are witnessing record lows with 10-year German Bund yields at -0.40%.
• As rates look more likely to fall than rise, the combination of higher relative yields and a shift in focus on limiting credit risk away from interest rate risk could provide further tailwinds for U.S. investment grade corporate bonds.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through June 30, 2019, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The Fund is a passively managed index fund designed to track the performance of its stated benchmark index. It does not invest in securities based on the managers' view of the investment merit of a particular security or company, nor does it conduct conventional investment research or analysis or forecast market movement or trends, in managing the assets of the Fund. The Fund seeks to remain fully invested at all times in securities that, in combination, provide exposure to its respective benchmark Index without regard to market conditions, trends or direction.

The S&P 500^® /MarketAxess® Investment Grade Corporate Bond Index seeks to measure the performance of corporate debt issued in the U.S. by S&P 500 companies. It is a market value-weighted subset of the S&P 500 Investment Grade Corporate Bond index that seeks to measure the performance of corporate debt issued in the U.S. by companies (and their subsidiaries in the S&P 500), subject to additional liquidity rules. Indexes are unmanaged and one cannot invest directly in any index.

Jeffrey Ploshnick served as a portfolio manager on the Fund until April 2019.

Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. While the Fund attempts to track the performance of its stated index, there is no guarantee or assurance that the methodology used to create the index will result in the Fund achieving high, or even positive, returns. The Index may underperform, and the Fund could lose value, while other indices or measures of market performance increase in value. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in below investment grade securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. As of November 30, 2017, the index was concentrated in the financial industry group; therefore, the Fund is subject to the same risks faced by companies in the financials industry to the same extent as the index is so concentrated. Such risks include extensive government regulation, fluctuation of profitability, and credit losses resulting from financial difficulties of borrowers. A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index, and there is no guarantee that the Fund will achieve a high degree of correlation. Failure to achieve a high degree of correlation may prevent the Fund from achieving its investment objective. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. These and other risks are more fully described in the Fund's prospectus. Not all funds or fund classes may be offered at all broker/dealers.