Returns for the 3rd Quarter seemed unfazed by the chaotic headlines, as both stocks and bonds posted positive gains. Here are a few highlights from the Quarterly Market Review (click for full report), a snapshot of the performance of the stock and bond markets last quarter.
Long-term investors who stayed the course in the market reaped the rewards this quarter as US Stocks, International Stocks and Emerging Markets Stocks showed strong gains with returns of 9.21%, 4.92% and 9.56% respectively (See Page 3).
Positive Returns Amid Negative News
Despite gloomy news predominating airwaves last quarter, the long-term Market Summary on page 4 indicates positive returns for the 1 year, 5 year and 10 year except for Global Real Estate. Investors must remember that daily events in the news must be viewed with a long-term perspective and avoid making investment decisions based solely on the news. However, amidst the quarter were some positive headlines interspersed with the negative news (see page 5 and 6), including:
“Consumer Spending Rose 5.6% in June”
“US Industrial Production Rises for 3rd Straight Month”
“US Existing Home Sale Rose 24.7% in July from June”
“Consumers Grow More Confident About US Economy”
While headlines like these don’t necessarily explain market returns, the World Stock Market Performance overall showed growth throughout the quarter (see page 5). We can also see that from where we were in March with the stock market experiencing steep declines, oil prices collapsing and record unemployment due to an economic lockdown, during the last two quarters, the stock market experienced significant gains and a steady recovery (see Page 6).
Portfolio Planning – Diversify is the Game
When we look at performance for the quarter, we see the following: (see pages 10, 11, 16):
International Emerging Markets Stocks outperformed US and International Developed Stocks (page 10)– The stock markets of India, Pakistan, Taiwan and South Korea all posted returns of over 14% last quarter, which is why we continue to advise clients remain diversified in emerging markets stocks. (see page 11).
Value stocks underperformed growth stocks (see pages 8-10) but consider the long-term historical record on page 18 and this video from Dimensional Fund Advisors to understand why we still recommend value stocks as part of a diversified portfolio.
Small Company Stocks outperformed Large Company Stocks in International Developed Markets and International Emerging Markets (see pages 9-10). In addition, International Emerging Markets Small Company Stocks and International Developed Markets Small Company Stocks lead all asset classes with a quarterly return of over 10% (see page 7).
See full report of the Market Review for Q3 2020 or download here: