U.S. large-cap stocks advanced in the final quarter of 2015, pushing the S&P 500 Index back into positive territory for the year on a total return (including dividends) basis. Most of the gains occurred in October, and stocks were volatile in the year's final weeks as geopolitical strife and uncertainty over monetary policy weighed on sentiment. The U.S. economic outlook remained bright enough for the Federal Reserve to raise the benchmark fed funds rate on December 16, its first rate hike after seven years of near-zero rates. All sectors in the S&P 500 advanced. Materials rose the most, gaining nearly 10% as a few large mergers offset weak commodity prices. Energy stocks added the least as global oil prices sank to an 11-year low of roughly $37 a barrel. Value stocks underperformed growth across all market capitalizations.
The Equity Income Fund returned 5.67% in the quarter compared with 7.04% for the S&P 500 Index and 5.28% for the Lipper Equity Income Funds Index. For the 12 months ended December 31, 2015, the fund returned −6.66% versus 1.38% for the S&P 500 Index and −2.96% for the Lipper Equity Income Funds Index. The fund's average annual total returns were −6.66%, 8.67%, and 5.65% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. The fund's expense ratio was 0.66% as of its fiscal year ended December 31, 2014.
Financials was the portfolio's largest overweight sector as of year-end. Our financials holdings are mostly banks, insurers, and capital markets companies. Financial stocks have rebounded from the 2008 global financial crisis, but we believe that valuations of select companies are still reasonable and that the sector should benefit from the improving economy and higher interest rates. Utilities and energy are other overweight sectors. We seek energy companies that can stay competitive in a depressed oil environment with strong balance sheets, access to low-cost sources of oil and natural gas, and lower cost structures. Though we believe that commodity prices will stay subdued due to increased global supply, we believe that some companies operating in industry downturns represent good opportunities for long-term investors. Information technology remains the largest underweight sector.
Volatility surged in the final quarter of 2015 as investors worried about rising U.S. interest rates, weakness in emerging markets, and falling commodity prices. Our outlook is cautious as a result of these issues, which will likely remain at the forefront in 2016. While we anticipate reasonable economic and earnings growth, valuations appear stretched and headwinds to the global growth outlook have grown. Sources of instability range from China's efforts to manage a slowing economy to geopolitical tension arising from events in the Middle East. In the U.S., the Fed's resumption of tighter monetary policy has left many investors worried that rising rates could undermine growth momentum. We expect modest equity returns this year as commodities weakness and a strong dollar continue to weigh on corporate earnings.
