Investment Review
Summer 2021
Once again, having a long-term focus paid off. Five quarters after the market low of 2020, US small cap value was the best-performing asset class for the past 12 months with a gain of over 73%. For the quarter ending June 30, US REITs were the winner, returning almost 12%. See the benchmark chart below for details of specific asset class returns for the prior quarter and 12 months ending June 30, 2021.
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 2021 | 12 Months Ending 6/30/2021 |
| U.S. Large Cap Vanguard 500 Index Fund |
+8.54% | +40.76% |
| U.S. Large Cap Value iShares Russell 1000 Value Index |
+5.05% | +43.47% |
| U.S. Small Cap iShares Russell 2000 Index |
+3.97% | +61.87% |
| U.S. Small Cap Value iShares Russell 2000 Value Index |
+4.19% | +72.81% |
| International Vanguard Total International Stock Index Fund |
+5.52% | +36.51% |
| Emerging Markets Vanguard FTSE Emerging Markets ETF |
+4.89% | +40.22% |
| U.S. REITs Vanguard REIT ETF |
+11.60% | +34.41% |
| Investment-Grade Bonds iShares Core Total U.S. Bond Market ETF |
+1.77% | -0.55% |
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 in the second quarter. Looking at broad market indices, US and non-US developed markets outperformed emerging markets for the quarter.
Value performance was mixed in the US, with small value outperforming small growth but large value underperforming large growth. Value underperformed growth in non-US developed markets and outperformed in emerging markets.
Small caps underperformed large caps in the US and non-US developed markets but outperformed in emerging markets.
REIT indices outperformed equity market indices in the US and non-US developed markets.
U.S. Stocks
The US equity market posted positive returns for the quarter and outperformed non-US developed markets and emerging markets.
Value underperformed growth in large cap stocks but outperformed growth in small cap stocks.
Small caps underperformed large caps.
REIT indices outperformed equity market indices.
International Developed Market Stocks
Developed markets outside the US posted positive returns for the quarter, underperforming US equities but outperforming emerging markets.
Value underperformed growth.
Small caps underperformed large caps.
Emerging Markets Stocks
Emerging markets posted positive returns for the quarter, underperforming the US and non-US developed equity markets.
Value outperformed growth.
Small caps outperformed large caps.
Real Estate Investment Trusts
US real estate investment trusts outperformed non-US REITs during the quarter.
Fixed Income
Changes in interest rates in the US Treasury fixed income market were generally mixed during the second quarter of 2021. The yield on the 5-Year Treasury note decreased 7 basis points (bps) to 0.88%. The yield on the 10-Year T-note decreased 28 bps to 1.46%. The 30-Year Treasury bond yield declined 35 bps to 2.04%.
On the short end of the yield curve, the 1-Month US Treasury bill yield remained unchanged at 0.05%, and the 1-Year T-bill yield increased 2 basis point to 0.10%. The 2-Year Treasury note increased 10 bps to 0.25%.
In terms of total returns, short-term corporate bonds gained 0.70%. Intermediate-term corporate bonds returned 1.70%.
The total return for short-term municipal bonds was 0.30%, while intermediate-term munis returned 0.80%. Revenue bonds outperformed general obligation bonds.
Conclusion
We continue to recommend an asset allocation for our clients based upon personal risk tolerance and long-term objectives. A mix with a larger allocation to stock is considered riskier, but has a higher expected return over time.
Thank you for your continued confidence and trust.
