During the last quarter, the best performing asset classes were international small value stocks, emerging markets stocks, and international large value stocks. The following chart shows the 3-month, year-to-date, and 5-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, 2025
| DFA Fund / Index | 3 Month Return | YTD Return | 5 Year Return* |
| S&P 500 Index | 8.12 | 14.83 | 16.47 |
| DFA World Core Equity | 7.35 | 18.11 | 14.52 |
| DFA U.S. Large Value | 6.40 | 11.28 | 14.87 |
| DFA U.S. Small | 7.63 | 6.26 | 15.16 |
| DFA U.S. Small Value | 8.60 | 4.85 | 19.58 |
| DFA Real Estate (REITs) | 2.11 | 3.89 | 7.05 |
| DFA Int’l Large | 5.72 | 27.08 | 12.24 |
| DFA Int’l Large Value | 8.82 | 33.91 | 18.74 |
| DFA International Small | 6.35 | 30.90 | 11.67 |
| DFA Int’l Small Value | 10.65 | 41.62 | 17.61 |
| DFA Emerging Markets | 9.95 | 26.79 | 9.45 |
| DFA 5-Year Global Bonds | 1.23 | 3.43 | 1.17 |
| DFA Inflation Protected Bonds | 2.14 | 7.22 | 1.38 |
*Note: Returns for periods greater than 1 year are annualized. Top 3 returns are in bold.
The investment markets continued their upward momentum in the third quarter of 2025 as the S&P 500* rose 8.12%, international stocks*** rose 6.93% and the global short-term bond market** gained 1.23%. The quarter began with the signing of a new tax bill, which extended current tax rates and introduced several new tax breaks. The most notable of these is the new “enhanced senior deduction” for taxpayers over age 65, which provides an additional $6,000 deduction per qualifying individual. These changes, along with other updates to the tax code, are expected to significantly impact tax planning this year and create new opportunities to reduce lifetime tax burdens.
Markets were also buoyed by the U.S. signing several major trade deals, particularly with the European Union, South Korea, and the United Kingdom. These agreements helped ease uncertainty surrounding ongoing tariff negotiations. In addition, the Federal Reserve delivered another widely anticipated interest rate cut in September. Investors are now hopeful for one or two more cuts before the end of 2025.
With markets reaching new all-time highs and delivering strong results over the past three years, many investors have begun to wonder whether future returns might be muted. Encouragingly, research from DFA covering 1926–2024 provides historical context on how the S&P 500 has performed following new all-time highs:
Future returns after months ending at a record high:
- 1 Year = 13.7%
- 3 Years = 10.6%
- 5 Years = 10.3%
Future returns after months ending at any level:
- 1 Year = 12.5%
- 3 Years = 10.7%
- 5 Years = 10.3%
The results may feel counterintuitive, but the data is clear: reaching an all-time high is not an automatic signal that stocks are overvalued or on the verge of a crash. While there are no guarantees that markets will perform well through the rest of this year or next, it is helpful to understand how they have historically responded after setting new highs.
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Enjoy the fall weather and the magical holidays that follow!
*As measured by Vanguard Total Stock Market (VOO)
**As measured by DFA 5-Year Global Fixed Income Portfolio (DFGBX)
***As measured by Vanguard Total International Stock Market (VTIAX)
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.