As of 06-30-2018

Highlights

  • Small-capitalization companies meaningfully outperformed large- and mid-cap companies during the quarter
  • An overweight to equity investments and underweight in fixed income contributed positively to result
  • End-of-quarter positioning continues to favor equity investments relative to fixed income

The second quarter began with small positive returns in April, improved significantly in May for all but large-cap value and finished weakly positive again in June as uncertainty concerning the developing trade dispute may have diminished the optimism of market participants. The Russell 3000 ended the quarter with a return of 3.89%, led by small-cap stocks (the small-cap Russell 2000 Index returned 7.75%, the mega-cap Russell Top 200 Index returned 3.86% and the Russell Midcap Index trailed at 2.82%). Small-cap stocks benefited as people saw that they had less exposure to international trade. While growth did lead value in the Russell 3000, almost all of that lead was attributed to technology stocks: Microsoft plus the FAANGs – Facebook, Amazon Apple, Netflix and Alphabet (Google) – were the top contributors to the Russell 3000 Index.

Fixed-income performance was influenced by a number of disparate forces including strong U.S. growth, weaker international growth, a Federal Reserve still solidly on a rate-hiking path, dollar strength and weakness in emerging-market (EM) debt markets. The result was a much flatter U.S. Treasury curve and a mildly negative performance as evidenced by the -0.16% return on the Bloomberg Barclays Capital U.S. Aggregate Bond Index. In a reversal from last quarter, Real Estate Investment Trusts (REITs) had a strong performance with the MSCI US REIT Index returning 10.11% over the period. The combination of perceived slower international growth and a stronger dollar inhibited the performance of international equity markets. For the quarter the Morgan Stanley Capital International (MSCI) EAFE Index returned -1.07%.

Performance

Federated MDT Balanced Fund Institutional Shares returned 2.01% in the second quarter, which exceeded the 1.99% return for its benchmark, a 60%/40% blend of the S&P 500 Index and the Barclays Capital U.S. Aggregate Bond Index.

Performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than what is stated. Other share classes may have experienced different returns than the share class presented. To view performance current to the most recent month-end and for after tax returns, click on the Performance tab.

Click the Performance tab for standard fund performance.

Performance Contributors

  • An overweight to equity investments and underweight in fixed income contributed positively to results over the quarter
  • Although overall domestic equity performance mildly trailed its benchmark, holdings in shares of companies in the Health Care, Energy and Consumer Staples sectors contributed positively
  • An overweight to small-capitalization companies helped results as they performed better than large- and mid-capitalization companies over the period

Performance Detractors

  • Holdings in shares of companies in the Information Technology and Financials sectors made a small negative contribution to results
  • An overweight position in EM and Investment Grade bonds contributed negatively to performance within the fixed-income portfolio

How We Are Positioned

As of the end of the period, domestic equities accounted for 57.7% of the portfolio and international equities 5.9%. Fixed income and cash investments represented 32.7% and 2.0%, respectively, while REITs accounted for 1.7%. Domestic equity investments are modestly more weighted toward value stocks than growth. Fixed-income investments are positioned with a slightly lower duration exposure relative to the benchmark.