Investment Review

Summer 2019

During the second quarter of 2019, the S&P 500 hit a record close and the overall world stock market had a positive return for the quarter. U.S. REITs had a return of 12% for the 12 months ending June 30, and Investment Grade Bonds returned almost 8% for the same period. Small cap blend and value stocks had negative returns for 12 months, but returned a positive 1.9% and 1.0%, respectively, for the second quarter.

This article summarizes the performance of various asset classes during the second quarter of 2019, and for the 12-month period ending March 31.

 
Selected Headlines from the Past 12 Months Graphed with the World Stock Market Performance (MSCI All Country World Index)

 
The chart above highlights some of the year’s prominent headlines in the context of global stock market performance as measured by the MSCI All Country World Index-Investable Market Index (MSCI ACWI IMI). We are not offering these headlines to explain market returns. But they do serve as a reminder that investors should view daily events from a long-term perspective and avoid making financial decisions based solely on the news.

 
Investment Review

Benchmark Funds	Q2 2019	12 Months Ending 06/30/2019
U.S. Large Cap Vanguard 500 Index Fund	+4.3%	+10.3%
U.S. Large Cap Value iShares Russell 1000 Value Index	+3.6%	+8.0%
U.S. Small Cap iShares Russell 2000 Index	+1.9%	-3.5%
U.S. Small Cap Value iShares Russell 2000 Value Index	+1.0%	-6.5%
International Vanguard Total International Stock Index Fund	+2.8%	+0.6%
Emerging Markets Vanguard FTSE Emerging Markets ETF	+0.8%	+3.6%
U.S. REITs Vanguard REIT ETF	+1.5%	+12.0%
Investment-Grade Bonds iShares Core Total U.S. Bond Market ETF	+2.8%	+7.7%

Source: SchwabInstitutional.com

 
Individual Asset Classes

The returns for the recent quarter that are listed below are sourced from my.Dimensional.com.

World Asset Classes

Equity markets around the globe posted positive returns for the quarter. Looking at broad market indices, U.S. equities outperformed non-U.S. developed and emerging markets during the quarter. Value stocks outperformed growth stocks in emerging markets but underperformed in developed markets, including the U.S., while small caps underperformed large caps in all regions. REIT indices underperformed equity market indices in both the U.S. and non-U.S. developed markets.

U.S. Stocks

U.S. equities outperformed both non-U.S. developed and emerging markets equities. Small caps underperformed large caps in the U.S. Value underperformed growth in the U.S. across large and small cap stocks.

International Developed Market Stocks

In U.S. dollar terms, developed markets stocks outside the U.S. outperformed emerging markets equities but underperformed the U.S. equity market during the quarter. Small caps underperformed large caps in non-U.S. developed markets. Value underperformed growth across large and small cap stocks.

Emerging Markets Stocks

In U.S. dollar terms, emerging markets underperformed developed markets, including the U.S. Value stocks generally outperformed growth stocks. Small caps underperformed large caps.

Real Estate Investment Trusts

Non-U.S. real estate investment trusts outperformed U.S. REITs in U.S. dollar terms.

Fixed Income

Interest rates decreased in the U.S. Treasury fixed income market during the second quarter. The yield on the 5-year Treasury note declined by 47 basis points (bps), ending at 1.76%. The yield on the 10-year Treasury note fell by 41 bps to 2.00%. The 30-year Treasury bond yield decreased by 29 bps to finish at 2.52%.

On the short end of the curve, the 1-month Treasury bill yield decreased to 2.18%, while the 1-year T-bill yield decreased by 48 bps to 1.92%. The 2-year T-note yield finished at 1.75%, decreasing 52 bps.

In terms of total returns, short-term corporate bonds increased by 2.09%. Intermediate-term corporate bonds had a total return of 3.13%.

The total return for short-term municipal bonds was 1.12%, while intermediate munis returned 1.98%. Revenue bonds outperformed general obligation bonds.

Conclusion

Long-term investors should be aware that letting short-term trends influence their investment approach will likely be counterproductive. Please let us know if you’d like to discuss your portfolio or financial plan.

Thank you for your continued confidence and trust.