Summer 2024
Emerging market stocks were the winner for the second quarter of 2024, returning 5%. This is one of the most volatile asset classes our clients hold. The average quarterly return for emerging market stocks since January 2001 was 2.5%, with the best and worst returns of 34.7% and -27.6% in the second quarter of 2009 and fourth quarter of 2008, respectively.
US stocks and global bonds outside of the US had positive returns for the second quarter of 2024. US bonds were flat. International developed stocks and global real estate were down by -0.6% and -1.48%, respectively.
For the past 12 months and past 10 years, all major market indexes of both stocks and bonds had positive returns. For the five-year period ending June 30, 2024, US bonds had a slightly negative return of -0.23%, while the other major market indices had positive returns. If you hold bonds in your portfolio, they are there to reduce the volatility of your portfolio returns.
The takeaway is that if you can stomach the daily and quarterly volatility that comes with holding stocks, that’s the place to earn the highest returns over longer time periods.
Selected Headlines from the Past 12 Months Graphed with the World Stock Market Performance (MSCI All Country World Index)
The chart above highlights some of the year’s prominent headlines in the context of global stock market performance as measured by the MSCI All Country World Index-Investable Market Index (MSCI ACWI IMI). We are not offering these headlines to explain market returns. But they do serve as a reminder that investors should view daily events from a long-term perspective and avoid making financial decisions based solely on the news.
Investment Review
| Benchmark Funds | Q2 2024 | 12 Months Ending 06/30/2024 |
| US Large Cap Vanguard 500 Index Fund |
4.3% |
24.5% |
| US Large Cap Value iShares Russell 1000 Value Index |
-2.2% |
12.9% |
| US Small Cap iShares Russell 2000 Index |
-3.3% |
9.8% |
| US Small Cap Value iShares Russell 2000 Value Index |
-3.7% |
10.5% |
| International Vanguard Total International Stock Index |
0.8% |
11.0% |
| Emerging Markets Vanguard FTSE Emerging Markets ETF |
5.2% |
11.3% |
| US REITs Vanguard Real Estate Index |
-2.0% |
4.6% |
| Investment-Grade Bonds iShares Core Total U.S. Bond Market ETF |
0.0% |
2.6% |
Individual Asset Classes
The returns for the recent quarter that are listed below are sourced from my.Dimensional.com.
US Stocks
The US equity market posted positive returns for the quarter and outperformed non-US developed markets, but underperformed emerging markets. Value underperformed growth. Small caps underperformed large caps. REIT indices underperformed equity market indices.
International Developed Market Stocks
Developed markets outside of the US posted negative returns for the quarter and underperformed both US and emerging markets. Value outperformed growth. Small caps underperformed large caps.
Emerging Markets Stocks
Emerging markets posted positive returns for the quarter and outperformed both US and non-US developed markets. Value outperformed growth. Small caps outperformed large caps.
Real Estate Investment Trusts
US real estate investment trusts outperformed non-US REITs during the quarter.
Fixed Income
Interest rates generally increased in the US Treasury market for the quarter.
On the short end of the yield curve, the 1-Month US Treasury Bill yield decreased 2 basis points (bps) to +5.47%, while the 1-Year US Treasury Bill yield increased 6 bps to +5.09%. The yield on the 2-Year US Treasury Note increased 12 bps to +4.71%.
The yield on the 5-Year US Treasury Note increased 12 bps to +4.33%. The yield on the 10-Year US Treasury Note increased 16 bps to +4.36%. The yield on the 30-Year US Treasury Bond increased 17 bps to +4.51%.
In terms of total returns, short-term US Treasury bonds returned +0.77% while intermediate-term US Treasury bonds returned +0.58%. Short-term corporate bonds returned +0.96% and intermediate-term corporate bonds returned +0.74%.1
The total returns for short- and intermediate-term municipal bonds were +0.35% and -0.92%, respectively. Within the municipal fixed income market, general obligation bonds returned -0.30% while revenue bonds returned +0.07%.2
Conclusion
We continue to recommend an asset allocation for our clients based upon personal risk tolerance and long-term objectives. A mix with a larger allocation to stock is considered riskier but has a higher expected return over time.
Thank you for your continued confidence and trust.
Footnotes
- Bloomberg US Treasury and US Corporate Bond Indices.
- Bloomberg Municipal Bond Index.
