Investment Review

Summer 2022
The returns for all major asset classes we track were negative in the second quarter of 2022. The best performer was emerging markets; the benchmark fund returned -9.05%. The worst performer for the quarter was U.S. small cap blend; the benchmark fund returned -17.27%. For the 12 months ending June 30, 2022, all major asset classes had negative returns, as shown in the table below.
Bond returns were negative for the quarter. We continued to use this opportunity to tax loss harvest from client portfolios. These losses can be used in the future to offset capital gains.
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 2022 | 12 Months Ending 6/30/2022 |
U.S. Large Cap Vanguard 500 Index Fund |
-16.11% | -10.66% |
U.S. Large Cap Value iShares Russell 1000 Value Index |
-12.29% | -6.96% |
U.S. Small Cap iShares Russell 2000 Index |
-17.27% | -25.37% |
U.S. Small Cap Value iShares Russell 2000 Value Index |
-15.32% | -16.42% |
International Vanguard Total International Stock Index Fund |
-12.86% | -18.94% |
Emerging Markets Vanguard FTSE Emerging Markets ETF |
-9.05% | -21.00% |
U.S. REITs Vanguard REIT ETF |
-15.40% | -8.03 |
Investment-Grade Bonds iShares Core Total U.S. Bond Market ETF |
-4.58% | -10.26% |
Source: SchwabInstitutional.com
Individual Asset Classes
The returns for the recent quarter that are listed below are sourced from my.Dimensional.com.
U.S. Stocks
The US equity market posted negative returns for the quarter and underperformed both non-US developed and emerging markets. Value outperformed growth, small caps underperformed large caps, and REIT indices underperformed equity market indices.
International Developed Market Stocks
Developed markets outside of the US posted negative returns for the quarter, outperforming the US and underperforming emerging markets. Value outperformed growth, and small caps underperformed large caps.
Emerging Markets Stocks
Emerging markets posted negative returns for the quarter, outperforming the US and non-US developed markets. Value outperformed growth, and small caps underperformed large caps.
Real Estate Investment Trusts
US real estate investment trusts underperformed non-US REITs during the quarter.
Fixed Income
Interest rates increased across all maturities in the US Treasury market for the quarter.
The yield on the 5-Year US Treasury Note increased 59 basis points (bps) to 3.01%. The yield on the 10-Year US Treasury Note increased 66 bps to 2.98%. The yield on the 30-Year US Treasury Bond increased 70 bps to 3.14%.
On the short end of the yield curve, the 1-Month US Treasury Bill yield increased 111 bps to 1.28%, while the 1-Year US Treasury Bill yield increased 117 bps to 2.80%. The yield on the 2-Year US Treasury Note increased 64 bps to 2.92%.
In terms of total returns, short-term corporate bonds returned -1.94% and intermediate-term corporate bonds returned -3.92%.
The total return for short-term municipal bonds was +0.08% and -1.30% for intermediate-term municipal bonds. Within the municipal fixed income market, general obligation bonds outperformed revenue bonds, returning -2.51% vs. -3.37%, respectively.
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.