The returns for all major asset classes we track were negative in the first quarter of 2022. The best performer was U.S. Large Cap Value; the benchmark fund returned -0.74%. The worst performer for the quarter was U.S. Small Cap; the benchmark fund returned -7.54%. For the 12 months ending March 31, 2022, three asset classes performed very well: US Large Cap, US Large Cap Value, and US REITs as shown in the table below.
The bond returns were sharply negative for the quarter, and we used this opportunity to loss harvest losses from client portfolios. These losses will be used in the future to offset capital gains.
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.
|Benchmark Funds||Q1 2022||12 Months
|U.S. Large Cap
Vanguard 500 Index Fund
|U.S. Large Cap Value
iShares Russell 1000 Value Index
|U.S. Small Cap
iShares Russell 2000 Index
|U.S. Small Cap Value
iShares Russell 2000 Value Index
Vanguard Total International Stock Index Fund
Vanguard FTSE Emerging Markets ETF
Vanguard REIT ETF
iShares Core Total U.S. Bond Market ETF
Individual Asset Classes
The returns for the recent quarter that are listed below are sourced from my.Dimensional.com.
The US equity market posted negative returns for the quarter and outperformed emerging markets. Value outperformed growth, small caps underperformed large caps, and REIT indices outperformed equity market indices.
International Developed Market Stocks
Developed markets outside of the US posted negative returns for the quarter and outperformed both US equities and emerging markets. Value outperformed growth, and small caps underperformed large caps.
Emerging Markets Stocks
Emerging markets posted negative returns for the quarter, underperforming the US and non-US developed equity markets. Value outperformed growth, and small caps outperformed large caps.
Real Estate Investment Trusts
US real estate investment trusts underperformed non-US REITs during the quarter.
Interest rates increased across all maturities in the US Treasury market for the quarter.
The yield on the 5-Year US Treasury Note increased 116 basis points (bps) to 2.42%. The yield on the 10-Year US Treasury Note increased 80 bps to 2.32%. The yield on the 30-Year US Treasury Bond increased 54 bps to 2.44%.
On the short end of the yield curve, the 1-Month US Treasury Bill yield increased 11 bps to 0.17%, while the 1-Year US Treasury Bill yield increased 124 bps to 1.63%. The yield on the 2-Year US Treasury Note increased 155 bps to 2.28%.
In terms of total returns, short-term corporate bonds returned -3.73% and intermediate-term corporate bonds returned -5.25%.
The total return for short-term municipal bonds was -3.33% and -5.77% for intermediate-term municipal bonds. Within the municipal fixed income market, general obligation bonds outperformed revenue bonds, returning -6.07% versus -6.54%, respectively.
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.