By Christopher M. Jones, CFP® | April 4, 2019 ·
During the first quarter of 2019, the best performing asset classes were real estate, the S&P 500, and U.S. small stocks. The following chart shows the 3-month, 5-year, and 10-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, 2019
|DFA Fund / Index||3 Month Return||5 Year Return*||10 Year Return*|
|S&P 500 Index||13.65||10.91||15.92|
|DFA U.S. Large Value||10.79||7.68||16.45|
|DFA U.S. Small||12.42||6.15||16.43|
|DFA U.S. Small Value||11.43||4.16||15.46|
|DFA Real Estate (REITs)||17.04||9.82||18.80|
|DFA Int’l Large||10.49||2.28||8.86|
|DFA Int’l Large Value||8.46||1.07||8.87|
|DFA International Small||9.92||3.05||11.84|
|DFA Int’l Small Value||8.65||1.41||11.18|
|DFA Emerging Markets Core||8.61||3.44||9.85|
|DFA 5-Year Global Bonds||1.71||2.13||2.97|
|DFA Inflation Protected Bonds||3.62||2.06||3.58|
*Note: Returns for periods greater than 1 year are annualized. Top 3 returns are in bold.
It’s been ten years since the bottom of the Great Recession of ’08 – ‘09 and few predicted the ensuing ten-year run for the stock market. The S&P 500 has an annualized return of 15.92% over the last ten years—well above the long-term average. Real estate, US large value stocks and small US stocks have done even better over those ten years.
All of this occurred against the back drop of pundits claiming it would take ten or twenty years just to get back to the highs reached during fall 2007! The truth is the stock market recovered everything that was lost by 2012 and continued marching forward despite the Greek debt crisis, calls for a “double dip” recession, and claim after claim that the recovery simply just cannot continue.
During the first quarter, the world’s investment markets rallied on news of progress towards a trade deal with China and the Federal Reserve effectively stating they do not intend to raise interest rates at all in 2019. This was a stark reversal from their statements during the fourth quarter of 2018. These developments caused the bond market to rally and real estate to be the best performing asset class of the quarter.
We cannot beat the drum loud enough on the dangers of trying to predict the future, especially when it comes to the stock market. That lesson has been reiterated yet again over the last six months. The S&P 500 lost 13.52% in the fourth quarter 2018, but went up 13.65% during the first quarter 2019. If you closed your eyes on September 30th, 2018, and opened them today, you would think nothing has happened.
Fortunately, a swing like that worked perfectly for clients who had tax losses in non-retirement accounts. We aggressively took losses to help clients lower their tax bills for 2018 and some will even have losses that carryforward to be used to reduce 2019 taxes. Speaking of taxes, 2018 was the first year under the new tax code and we strongly encourage you to send us a copy of your 2018 return. Please upload your return into the “Shared Docs” folder of your eMoney vault.
Now, in order to comply with the provisions of the Gramm-Leach-Bliley Act, we are including a copy of SWM’s Privacy Statement 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 are excited to report that the firm is now registered as an investment advisor in California!
Thank you for your continued trust and confidence. Feel free to reach out if you need anything.
Enjoy the lovely spring weather!
About Christopher M. Jones, CFP®
Christopher M. Jones is the Founder and President of Sparrow Wealth Management, a fee-only financial planning and investment management firm based in Hermosa Beach, CA. 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. Chris is a CERTIFIED FINANCIAL PLANNERTM practitioner.