Investment Review

Winter 2022
The fourth quarter of 2021 was another great one for stocks, with large cap US stocks rising a whopping 11%; for the full year, this asset class returned almost 29%. REITs were the biggest winner, returning 15% for the quarter and over 40% for the year ending December 31. International stocks did not fare as well in the fourth quarter; stocks in developed countries outside of the US returned 2%, while emerging market stocks were flat. Bonds were also flat for the quarter, and down almost 2% for the year. The reason investors hold bonds is to smooth out portfolio returns.
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 | Q4 2021 | 12 Months Ending 12/31/2021 |
U.S. Large Cap Vanguard 500 Index Fund |
+11.02% | +28.66% |
U.S. Large Cap Value iShares Russell 1000 Value Index |
+7.77% | +24.95% |
U.S. Small Cap iShares Russell 2000 Index |
+2.00% | +14.54% |
U.S. Small Cap Value iShares Russell 2000 Value Index |
+4.21% | +27.96% |
International Vanguard Total International Stock Index Fund |
+2.11% | +8.62% |
Emerging Markets Vanguard FTSE Emerging Markets ETF |
-0.11% | +1.30% |
U.S. REITs Vanguard REIT ETF |
+15.03% | +40.52% |
Investment-Grade Bonds iShares Core Total U.S. Bond Market ETF |
-0.10% | -1.77% |
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 positive returns for the year and outperformed non-US developed 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 year, underperforming US equities but outperforming emerging markets equities.
Value outperformed growth.
Small caps underperformed large caps.
Emerging Markets Stocks
Emerging markets fell 2.5% for the year, underperforming both 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 year.
Fixed Income
Interest rate movements in the US Treasury fixed income market were mixed during the fourth quarter. The yield on the 5-year US Treasury note increased 28 basis points (bps) to 1.26%. The yield on the 10-year US Treasury note remained unchanged at 1.52%. The 30-year US Treasury bond yield decreased 18 bps to 1.90%.
On the short end of the yield curve, the 1-month US Treasury bill yield decreased 1 basis point, ending at 0.06%, while the 1-year US Treasury bill yield increased 30 bps to 0.39%. The 2-year US Treasury note yield increased 45 bps to 0.73%.
In terms of total returns, short-term corporate bonds lost 0.68%. Intermediate-term corporate bonds declined 0.56%.
The total return for short-term municipal bonds was -0.05%, while intermediate-term municipal bonds gained 0.27%. Revenue bonds performed in line with 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.