During the last quarter, the best performing asset classes were U.S. large stocks, international small value stocks, and inflation-protected bonds. 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 September 30, 2021
|
DFA Fund / Index |
3 Month Return |
1 Year Return |
20 Year Return* |
|
S&P 500 Index |
0.58 |
30.00 |
9.51 |
|
DFA U.S. Large Value |
-1.47 |
40.96 |
9.28 |
|
DFA U.S. Small |
-1.42 |
56.50 |
10.85 |
|
DFA U.S. Small Value |
-0.77 |
73.21 |
10.89 |
|
DFA Real Estate (REITs) |
0.38 |
32.45 |
10.43 |
|
DFA Int’l Large |
-1.11 |
26.59 |
6.63 |
|
DFA Int’l Large Value |
-0.49 |
41.54 |
7.19 |
|
DFA International Small |
0.28 |
32.58 |
10.53 |
|
DFA Int’l Small Value |
0.60 |
36.18 |
10.48 |
|
DFA Emerging Markets Core |
-6.81 |
23.17 |
10.92 |
|
DFA 5-Year Global Bonds |
-0.18 |
0.21 |
3.22 |
|
DFA Inflation Protected Bonds |
2.04 |
5.22 |
N/A |
*Note: Returns for periods greater than 1 year are annualized. Top 3 returns are in bold.
The global stock market had an up and down quarter as stocks were up almost 4% for the quarter through early September, only to give up all those gains by the end of the month. The world stock market finished down 1.30% for quarter*. The bond market was basically flat for the quarter with the lone bright spot being inflation-protected bonds, which continue to shine this year as inflation has held stubbornly high.
The downward market movement at the end of September has been linked to a stalemate in Congress as they failed to pass infrastructure and spending bills. These two bills, along with the potential for the Federal Reserve to start pairing back its bond-buying program, should dominate the market news cycle through the rest of the year. We expect the markets to react positively if they are able to pass both bills, but that remains to be seen.
There is a significant amount of tax, retirement, and estate-planning changes that could come if the bills are passed. When/if that occurs, it will be paramount to discuss the impact on your specific situation and any planning opportunities that should be implemented.
Next, we have been receiving a lot of questions about the possible impact of inflation on future stock returns. Dimensional Fund Advisors (DFA) published a white paper in September 2021 that concludes that “equity performance in the past three decades does not show any reliable connection between periods of high (or low) inflation and US stock returns.” Please take a minute to read DFA’s white paper on inflation.
Lastly, we encourage you to follow along on our social media to receive updates, commentary, and important information about the markets. We are active on Google, YouTube, Facebook, LinkedIn, Twitter and Instagram.
As always, we appreciate the trust you have placed in us and look forward to helping you meet all of your goals in the future.
Enjoy your fall and stay safe!
*As measured by the Vanguard Total World Stock Index Fund (VTWIX)
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.
