Client Letter – Q3 2023

During the last quarter, the best performing asset classes were short-term bonds, international large stocks, and small value 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, 2023

DFA Fund / Index 3 Month Return 1 Year Return 20 Year Return*
S&P 500 Index -3.27 21.62 9.72
DFA World Core Equity -2.64 21.59 N/A
DFA U.S. Large Value -1.40 16.56 8.96
DFA U.S. Small -3.80 13.96 9.18
DFA U.S. Small Value -0.83 17.51 9.27
DFA Real Estate (REITs) -8.34 -1.98 7.71
DFA Int’l Large -3.87 25.26 6.06
DFA Int’l Large Value 0.23 31.93 6.64
DFA International Small -3.33 21.52 7.65
DFA Int’l Small Value 0.07 28.27 7.89
DFA Emerging Markets -2.42 15.49 7.90
DFA 5-Year Global Bonds 1.34 4.27 2.31
DFA Inflation Protected Bonds -2.57 1.36 N/A

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

The third quarter saw the global stock market rally strongly in July on solid economic and jobs data, only to give back those returns over the course of August and September. Global stocks finished down 3.50% for the quarter*. The US bond market lost 3.09% for the quarter** as the Federal Reserve raised interest rates another .25% in July. The committee has yet to rule out more interest rate increases, and this has caused long term bond yields to rise significantly. On a positive note, our short-term bonds with Fidelity and DFA performed better than the bond markets overall, with quarterly returns ranging from 0.2% to 1.34% (5-year global bonds).

Disciplined investors still have reason to cheer as the global stock market has earned 20.68% since September 30th, 2022*. The widespread belief at that time was the US economy was doomed to enter a recession and the financial markets were on edge due to interest rates moving higher. Per usual, the markets are constantly digesting new information and resilient economic data and corporate earnings helped stocks mostly recover from their lows over the last year. Those who bailed out during the downturn face a difficult choice of when to get back in while patient investors were yet again rewarded for sticking to their investment plan, despite the bumpy road.

As always, please don’t hesitate to email or schedule a meeting if you have something on your mind.  We greatly appreciate the trust you have placed in us and look forward to helping you meet your goals in the future.

Enjoy the beautiful fall weather and the holidays that follow!

Chris signature

*As measured by Vanguard Total Stock Market (VTWIX)

**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.