Client Letter – Q2 2019

By Christopher Jones | July 5, 2019·

During the second quarter of 2019, the best performing asset classes were U.S. and international large stocks, as well as inflation-adjusted bonds.  The following chart shows the 3-month, 3-year, 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 June 30, 2019

DFA Fund / Index3 Month Return3 Year Return10 Year Return*
S&P 500 Index4.3014.1914.70
DFA U.S. Large Value3.0911.1014.36
DFA U.S. Small1.949.8113.99
DFA U.S. Small Value-0.797.7112.92
DFA Real Estate (REITs)1.745.3115.87
DFA Int’l Large3.288.966.79
DFA Int’l Large Value1.479.295.89
DFA International Small2.187.919.05
DFA Int’l Small Value0.156.298.17
DFA Emerging Markets Core0.869.116.29
DFA 5-Year Global Bonds1.401.682.96
DFA Inflation Protected Bonds3.092.183.90

*Note: Returns for periods greater than 1 year are annualized.  Top 3 returns are in bold.

The second quarter resulted in a mini rollercoaster ride as the global stock market rose in April, declined significantly in May but recovered and ended higher in June.  The S&P 500 finished the quarter up 4.3% and international stocks were up 3%.  US small stocks, REITs and emerging markets were all up for the quarter as well, although not to the same degree.

Both the stock and bond markets were boosted by the increasing prospect that the Federal Reserve, and other global central banks, are willing to cut interest rates to help boost the economy.  This so-called “insurance cut” is meant to help stave off any potential softness in the economy that could result in a mild recession.  Investors and economists remain worried that the longer a trade war drags on the more likely it is to cause a recession.

Wall Street has a classic phrase: “stocks climb a wall of worry” that we often reference.  Beyond that, the market doesn’t care about anyone’s predictions, no matter how smart they sound. A quick review of Wall Street’s top market strategist’s predictions over the first six months of 2019 would prove humbling for those that dared make them.  The market doesn’t care if you feel pessimistic or optimistic about the future.  And it definitely doesn’t care that you’re retiring next year. This all makes investing especially hard.

The weight of constant worry makes it difficult to maintain unwavering faith in the stock market.  The hard truth is, investors tend to get the return they deserve, which is to say, if you remain disciplined you are rewarded and if you panic you are punished. Those that were disciplined in December 2018 and May 2019 were rewarded.

Our job is to keep you focused when all the “noise” gets really loud.  The problem is, the noise always feels loud and as humans we put more weight on today’s worries and discount the worries of yesterday.  The best investors accept that there will always be something to worry about in the stock market. Our advice; there simply is no better alternative than taking the long-term view and sticking with the plan.

We greatly appreciate the trust you’ve placed in us to help guide you forward.  Please don’t hesitate to call or email if you need anything.  Enjoy the summer!

Warm regards,

Chris signature


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.



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