facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast blog search brokercheck brokercheck
%POST_TITLE% Thumbnail

Quarterly Market Review Q2 2018

Second Quarter 2018

Market Summary

Index Returns

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index [net div.]), US Bond Market (Bloomberg Barclays US Aggregate Bond Index), and Global Bond ex US Market (FTSE WGBI ex USA 1−30 Years [hedged to USD]). S&P data copyright 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2018, all rights reserved. Bloomberg Barclays data provided by Bloomberg. FTSE fixed income © 2018 FTSE Fixed Income LLC, all rights reserved.

World Stock Market Performance

MSCI All Country World Index with selected headlines from Q2 2018

These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news.

Graph Source: MSCI ACWI Index [net div.]. MSCI data © MSCI 2018, all rights reserved.
It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.

MSCI All Country World Index with selected headlines from past 12 months

These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news.

Graph Source: MSCI ACWI Index [net div.]. MSCI data © MSCI 2018, all rights reserved.
It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.

World Asset Classes

Second Quarter 2018 Index Returns (%)

  • Looking at broad market indices, the US outperformed non-US developed and emerging markets during the second quarter.
  • Small caps outperformed large caps in the US but underperformed in both non-US developed and emerging markets. The value effect was negative in the US as well as markets outside the US.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.
Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2018, all rights reserved. Dow Jones data copyright 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. S&P data copyright 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Bloomberg Barclays data provided by Bloomberg. Treasury bills © Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield).

US Stocks

Second Quarter 2018 Index Returns

  • The US equity market posted a positive return, outperforming both non-US developed and emerging markets in the second quarter.
  • Large cap value stocks underperformed large cap growth stocks in the US; however, small cap value stocks outperformed small cap growth.
  • There was a positive size premium, as small cap stocks generally outperformed large cap stocks in the US.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Marketwide (Russell 3000 Index), Large Cap (Russell 1000 Index), Large Cap Value (Russell 1000 Value Index), Large Cap Growth (Russell 1000 Growth Index), Small Cap (Russell 2000 Index), Small Cap Value (Russell 2000 Value Index), and Small Cap Growth (Russell 2000 Growth Index). World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. Russell 3000 Index is used as the proxy for the US market. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2018, all rights reserved.

International Developed Stocks

Second Quarter 2018 Index Returns

  • In US dollar terms, developed markets outside the US underperformed the US but outperformed emerging markets during the second quarter.
  • Value underperformed growth in non-US developed markets across large and small cap stocks.
  • Small cap underperformed large caps in non-US developed markets.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI World ex USA Index), Small Cap (MSCI World ex USA Small Cap Index), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USA Growth). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI World ex USA IMI Index is used as the proxy for the International Developed market. MSCI data © MSCI 2018, all rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes.

Emerging Markets Stocks

Second Quarter 2018 Index Returns

  • In US dollar terms, emerging markets posted negative returns in the second quarter, underperforming developed markets including the US.
  • The value effect was negative in large caps; however, value and growth stocks had similar performance among small cap stocks within emerging markets.
  • Small caps underperformed large caps in emerging markets.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI Emerging Markets Index), Small Cap (MSCI Emerging Markets Small Cap Index), Value (MSCI Emerging Markets Value Index), and Growth (MSCI Emerging Markets Growth Index). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI Emerging Markets IMI Index used as the proxy for the emerging market portion of the market. MSCI data © MSCI 2018, all rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes.

Select Country Performance

Second Quarter 2018 Index Returns

  • In US dollar terms, Israel and Norway recorded the highest country performance in developed markets, while Austria and Singapore posted the lowest returns for the second quarter. Most emerging markets recorded negative absolute returns with the exception of Columbia and Qatar, which posted the highest country performance. Brazil and Turkey had the lowest performance in the emerging markets.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Country performance based on respective indices in the MSCI World ex US IMI Index (for developed markets), MSCI USA IMI Index (for US), and MSCI Emerging Markets IMI Index. All returns in USD and net of withholding tax on dividends. MSCI data © MSCI 2018, all rights reserved. UAE and Qatar have been reclassified as emerging markets by MSCI, effective May 2014.

Select Currency Performance vs. US Dollar

Second Quarter 2018

  • Almost all currencies depreciated vs. the US dollar. For example, in developed markets, the Japanese yen and the British pound depreciated almost 4% and 6%, respectively. In emerging markets, the currency effect was greater; the Brazilian real, Turkish lira, and South African rand all depreciated by over 13%.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.

MSCI data © MSCI 2018, all rights reserved.

Real Estate Investment Trusts (REITs)

Second Quarter 2018 Index Returns

  • US real estate investment trusts outperformed non-US REITs in US dollar terms.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Number of REIT stocks and total value based on the two indices. All index returns are net of withholding tax on dividends. Total value of REIT stocks represented by Dow Jones US Select REIT Index and the S&P Global ex US REIT Index. Dow Jones US Select REIT Index used as proxy for the US market, and S&P Global ex US REIT Index used as proxy for the World ex US market. Dow Jones data copyright 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. S&P data copyright 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.

Commodities

Second Quarter 2018 Index Returns

  • The Bloomberg Commodity Index Total Return gained 0.40% during the second quarter.
  • The energy complex led performance with Brent oil returning 16.18% and WTI crude oil 12.70%.
  • Grains was the worst-performing complex; soybeans declined 18.40%, and soybean meal lost 15.85%.

Past performance is not a guarantee of future results. Index is not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.
Commodities returns represent the return of the Bloomberg Commodity Total Return Index. Individual Commodities are sub-index values of the Bloomberg Commodity Total Return Index. Data provided by Bloomberg.

Fixed Income

Second Quarter 2018 Index Returns

  • Interest rates increased in the US during the second quarter. The yield on the 5-year Treasury note rose 17 basis points (bps), ending at 2.73%. The yield on the 10-year T-note rose 11 bps to 2.85%. The 30-year Treasury bond yield climbed 1 bps to 2.98%.
  • The 1-month Treasury bill yield rose 14 bps to 1.77%, while the 1-year Treasury bill yield increased 24 bps to 2.33%. The 2-year Treasury note yield finished at 2.52% after increasing 25 bps.
  • In terms of total return, short-term corporate bonds gained 0.29%, while intermediate-term corporate bonds declined to 0.10%.
  • Short-term municipal bonds added 0.66%, while intermediate-term munis returned 0.81%. Revenue bonds performed in-line with general obligation bonds, returning 0.90% and 0.87%, respectively.

One basis point equals 0.01%. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Yield curve data from Federal Reserve. State and local bonds are from the S&P National AMT-Free Municipal Bond Index. AAA-AA Corporates represent the Bank of America Merrill Lynch US Corporates, AA-AAA rated. A-BBB Corporates represent the Bank of America Merrill Lynch US Corporates, BBB-A rated. Bloomberg Barclays data provided by Bloomberg.  US long-term bonds, bills, inflation, and fixed income factor data © Stocks, Bonds, Bills, and Inflation (SBBI) Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). FTSE fixed income indices © 2018 FTSE Fixed Income LLC, all rights reserved. ICE BofAML index data © 2018 ICE Data Indices, LLC.

Impact of Diversification

Second Quarter 2018 Index Returns

  • These portfolios illustrate the performance of different global stock/bond mixes. Mixes with larger allocations to stocks are considered riskier but have higher expected returns over time.

1.STDEV (standard deviation) is a measure of the variation or dispersion of a set of data points. Standard deviations are often used to quantify the historical return volatility of a security or portfolio.  

Diversification does not eliminate the risk of market loss. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management of an actual portfolio. Asset allocations and the hypothetical index portfolio returns are for illustrative purposes only and do not represent actual performance. Global Stocks represented by MSCI All Country World Index (gross div.) and Treasury Bills represented by US One-Month Treasury Bills. Globally diversified allocations rebalanced monthly, no withdrawals. Data © MSCI 2018, all rights reserved. Treasury bills © Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield).

Important Risk Disclosures

The fast price swings in commodities and currencies will result in significant volatility in an investor's holdings.
Currency Risk -because the security invests in stocks denominated in foreign currencies, changes in currency exchange
rates may negatively impact the securities return. The values of the foreign currencies may be subject to a high degree of
fluctuation due to changes in interest rates, the TS-8 effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency controls or other national or global political
or economic developments.
International and emerging market investing involves special risks such as currency fluctuation and political instability
and may not be suitable for all investors.
Investing in Real Estate Investment Trusts (REITs) involves special risks such as potential illiquidity and may not be suitable
for all investors. There is no assurance that the investment objectives of this program will be attained.
Small Cap stocks may be subject to a higher degree of risk than more established companies' securities. The illiquidity of the
Small Cap market may adversely affect the value of these investments.
Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long
periods of time.
Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will
decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state
and local taxes may apply.
High yield/junk bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit,
and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated
investors.
Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and
interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and
bonds are subject to availability and change in price.
Credit Quality is one of the principal criteria for judging the investment quality of a bond or bond mutual fund. As the term
implies, credit quality informs investors of a bond or bond portfolio's credit worthiness, or risk of default.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.
Diversification does not ensure against market risk.


Dimensional Fund Advisors is not affiliated with LPL Financial or Guillaume & Freckman, Inc.

This material has been prepared by Dimensional Fund Advisors.

Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and Guillaume & Freckman, Inc are separate entities from LPL Financial.