During the first quarter of 2021, the best performing asset classes were U.S. small and U.S. small value stocks. The following chart shows the 3-month, 1-year, and 20-year performance of many DFA funds (representing different asset classes) compared to the S&P 500 Index:
Market Returns for the period ending March 31, 2021
|
DFA Fund / Index |
3 Month Return |
1 Year Return* |
20 Year Return* |
|
S&P 500 Index |
6.17 |
56.35 |
8.47 |
|
DFA U.S. Large Value |
14.72 |
66.52 |
8.59 |
|
DFA U.S. Small |
18.36 |
95.61 |
10.42 |
|
DFA U.S. Small Value |
26.50 |
112.09 |
10.55 |
|
DFA Real Estate (REITs) |
8.36 |
33.74 |
10.23 |
|
DFA Int’l Large |
4.60 |
49.66 |
5.59 |
|
DFA Int’l Large Value |
11.73 |
60.74 |
6.36 |
|
DFA International Small |
5.92 |
65.83 |
9.77 |
|
DFA Int’l Small Value |
8.14 |
64.42 |
9.93 |
|
DFA Emerging Markets Core |
4.67 |
63.58 |
10.06 |
|
DFA 5-Year Global Bonds |
0.00 |
1.33 |
3.42 |
|
DFA Inflation Protected Bonds |
-1.69 |
7.97 |
N/A |
*Note: Returns for periods greater than 1 year are annualized. Top 3 returns are in bold.
This time last year we were all filled with great anxiety about a new virus spreading globally, an economy purposefully shut down, and the financial markets in steep decline. No one knew how the next year would unfold or what challenges we would face. Stock market forecasts were dire and provided little reason to be optimistic. And how did the global stock market respond to all those worries over the following 12 months?
By gaining 57.89%* from March 31st, 2020 – March 31st, 2021
Fast forward to today and we still carry the weight of an ongoing pandemic, but with the hope that vaccinations may lead to life slowly returning to normal over the next year or two.
The financial markets share this optimism as the global stock market rose by 5.14%* during the first quarter of 2021. U.S. small value stocks led the way with an incredible 26.5%** gain over the last three months. U.S. large value stocks also outperformed by earning 14.72%*** for the quarter. Our tilts towards small and value stocks have served us well over the last quarter and year, as well as over the past 20 years (see chart above).
The bond market is showing concern as interest rates moved higher despite the Federal Reserve stating they do not intend to raise rates until 2023. Inflation has remained tame despite massive amounts of government stimulus, but the true test will come once COVID cases decline due to vaccinations and the economy starts to fully reopen.
On the tax front, the IRS brought welcome news by delaying the tax filing deadline to May 17th to help tax preparers deal with the last-minute changes to the tax code for 2020. Please work with your accountant to provide us with a copy of your federal (and state) tax returns upon completion. Also, we are back to “normal” again when it comes to required minimum distributions (RMDs) and we have already made most of your distributions for 2021.
Now, in order to comply with the provisions of the Gramm-Leach-Bliley Act, SWM’s Privacy Statement is available here for your review. The Privacy Act requires that we deliver this to every client on an annual basis. Also, our ADV Part 2A & 2B has been updated recently. You can read the updated version by clicking on this link: ADV Part 2A & 2B.
We greatly appreciate the trust you have placed in us. Feel free to reach out if you need anything.
Stay safe!
*As measured by the Vanguard Total World Stock Index Fund (VTWIX)
**As measured by the DFA U.S. Small Cap Value (DFSVX)
***As measured by the DFA U.S. Large Cap Value (DFLVX)
About Christopher Jones
Christopher Jones is the Founder and President of Sparrow Wealth Management, a fee-only financial planning and investment management firm. Before entering the investment field, Chris was a management consultant for Deloitte Monitor. He graduated summa cum laude from Brigham Young University with a B.S. in Economics and a minor in Business Management.
