During the last quarter, the best performing asset classes were U.S. real estate, international small stocks, and U.S. small 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 September 30, 2024
| DFA Fund / Index | 3 Month Return | 1 Year Return | 20 Year Return* |
| S&P 500 Index | 5.89 | 36.35 | 10.71 |
| DFA World Core Equity | 6.70 | 29.66 | N/A |
| DFA U.S. Large Value | 6.96 | 25.87 | 9.09 |
| DFA U.S. Small | 8.63 | 26.09 | 9.52 |
| DFA U.S. Small Value | 7.62 | 25.62 | 9.02 |
| DFA Real Estate (REITs) | 16.55 | 35.13 | 8.14 |
| DFA Int’l Large | 7.58 | 24.84 | 6.26 |
| DFA Int’l Large Value | 6.78 | 20.98 | 6.25 |
| DFA International Small | 9.00 | 24.52 | 7.57 |
| DFA Int’l Small Value | 8.48 | 26.15 | 7.78 |
| DFA Emerging Markets | 7.02 | 24.22 | 7.71 |
| DFA 5-Year Global Bonds | 1.40 | 5.63 | 2.48 |
| DFA Inflation Protected Bonds | 4.27 | 10.15 | N/A |
*Note: Returns for periods greater than 1 year are annualized. Top 3 returns are in bold.
The investment markets continued their upward trend in the third quarter with a flurry of encouraging news on the health of the economy and progress against inflation. U.S. gross domestic product (GDP), which measures the value of goods and services the country produces, grew by an annualized 3% in the second quarter while inflation dropped to an annualized 2.5%.
This encouraging news gave the Federal Reserve confidence to cut interest rates by 0.50% at the September meeting. The members of the board also pointed to additional cuts totaling another 0.50% before the end of 2024. This was a stark difference from just a few months prior when it appeared there would be no interest rate cuts in 2024.
Both stock and bond markets rallied on this news, with the global stock market* up 6.70% and the U.S. bond market** up 5.72% for the quarter. U.S. real estate, represented by DFREX, was the biggest beneficiary of interest rate cuts by gaining 16.55% in the last three months. Most equity asset classes posted strong gains for the quarter.
In last quarter’s letter, we recommended maintaining diversification despite a handful of stocks being responsible for the majority of the S&P 500’s gains in 2024. That recommendation was rewarded in the third quarter as four of the seven stocks that make up the “Magnificent 7” actually went down while virtually every other asset class went up (AMZN, GOOG, NVDA, MSFT).
Lastly, we turn our attention to the upcoming election, which will undoubtably dominate headlines in the fourth quarter. Fortunately, the evidence clearly shows that our long-term investment principles have been rewarded no matter which party wins. We remain convinced that altering your investment strategy based on your politics is a recipe for disaster. Click here for an extremely useful visual from DFA showing how the S&P 500 has performed during each president’s time over the last 100 years to help illustrate this point.
Enjoy the beautiful fall weather and the holidays that follow!
*As measured by DFA World Core Equity Portfolio (DREIX)
**As measured by Vanguard Total Bond Market (VBTLX)
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.
