During the last quarter, the best performing asset classes were international large value stocks, international small stocks, and international small value stocks. The following chart shows the 3-month, 1-year, and 3-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, 2026
| DFA Fund / Index | 3 Month Return | 1 Year Return | 3 Year Return* |
| S&P 500 Index | 2.30 | 15.74 | 22.89 |
| DFA World Core Equity | 0.44 | 16.87 | 20.65 |
| DFA U.S. Large Value | 1.22 | 23.24 | 19.03 |
| DFA U.S. Small | -6.11 | 14.36 | 15.48 |
| DFA U.S. Small Value | -2.80 | 19.19 | 16.27 |
| DFA Real Estate (REITs) | -6.43 | 5.01 | 10.71 |
| DFA Int’l Large | 0.53 | 16.76 | 19.61 |
| DFA Int’l Large Value | 3.75 | 24.26 | 23.72 |
| DFA International Small | 3.27 | 14.58 | 19.90 |
| DFA Int’l Small Value | 7.77 | 24.32 | 27.58 |
| DFA Emerging Markets | -2.09 | 31.43 | 24.28 |
| DFA 5-Year Global Bonds | -0.83 | 1.84 | 4.03 |
| DFA Inflation Protected Bonds | -3.28 | -2.29 | 3.78 |
*Note: Returns for periods greater than 1 year are annualized. Top 3 returns are in bold.
The third quarter brought a series of developments that weighed on both stock and bond markets. The 10-year U.S. Treasury yield rose above 5% for the first time in 19 years, inflation picked back up as the conflict in the Middle East drove oil, gasoline and diesel prices higher, and the Federal Reserve pivoted to raising interest rates for the first time since 2023.
These developments caused longer-term bonds to experience particularly steep declines. While the short-term bond market** fared better, it still declined 0.83% for the quarter. The S&P 500* managed to gain 2.3%, but much of that strength was driven by a relatively small group of large technology companies. Many stocks beneath the surface, both in the U.S. and globally, fared notably worse. One important source of support was corporate earnings, which continued to deliver strong results and helped offset some of these headwinds.
Investors often hear the mantra “buy low” in reference to the stock market, but today there may be a similar opportunity developing in bonds. The rise in interest rates has created meaningfully higher yields for investors putting new money to work. For instance, the 1-year U.S. Treasury is currently yielding approximately 4.69%, while the 5-year Treasury is yielding approximately 5.09%. These are attractive yields for the more conservative part of our portfolios, particularly compared with what was available for much of the past decade.
Higher interest rates are not without consequences. They can make borrowing more expensive for those looking to buy a home or car and can increase costs for borrowers with variable-rate debt, such as HELOCs and credit cards. For savers and bond investors, however, higher yields can ultimately be beneficial, particularly when investing in shorter-term bonds that can mature and be reinvested at today’s higher rates.
Although the recent decline in bond prices has caused negative headlines, we believe the resulting increase in yields should improve the long-term return potential of the bond portion of our portfolios.
We greatly appreciate the trust you have placed in us, and we look forward to continuing to help you meet your financial goals.
Enjoy the fall weather and the wonderful holiday season!
*As measured by Vanguard Total Stock Market (VOO)
**As measured by DFA 5-Year Global Fixed Income Portfolio (DFGBX)
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.