The March 31, 2011 Portfolio Fact Sheets have been posted to our website: Portfolio Fact Sheets 03312011
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PORTFOLIO FACT SHEETS
The January 31, 2011 Portfolio Fact Sheets have been posted to our website: Portfolio Fact Sheets 01312011.
QUARTERLY INVESTMENT REVIEW
The following is an excerpt from our fourth quarter 2010 Quarterly Investment Review. The full version has been posted to our website: Quarterly Investment Update 12312010.
- With few exceptions, equity markets around the world continued their strong performance in the fourth quarter, and had a second consecutive year of outstanding gains. In the US, the fourth quarter saw much improved economic and financial data; renewed efforts to stimulate economic activity by policymakers in the form of additional monetary and fiscal measures; and the midterm congressional elections, the outcome of which removed some uncertainty from the investment landscape. The broad US market gained over 11%, with all asset classes delivering double-digit positive returns.
- The overall performance in other developed markets was not nearly as good in the quarter, or in the year. As has been the case for most of the past few quarters, there was much dispersion in performance at the individual country level. Spain and Greece, which continue to face severe fiscal problems, had sharply negative returns for the quarter and the year. At the other end of the spectrum, resource-rich countries such as Canada and Norway were the top performers in the quarter, and had excellent returns for the year as well. The US dollar lost ground against most major currencies except the euro, which helped the dollar-denominated returns of developed market equities.
- Emerging markets had similar performance to that of developed markets in the quarter, and once again ended the year as the top-performing region. As in the case of developed markets, there was much dispersion in the performance of different emerging markets, with resource-rich countries such as Russia and Mexico performing exceptionally well in the quarter. The US dollar also lost ground against the main emerging market currencies in the fourth quarter, which contributed positively to the dollar-denominated returns of emerging market equities.
- Although deep value stocks had very strong performance, value stocks in general underperformed growth stocks across all market capitalization segments in the US and in other developed markets. In emerging markets, on the other hand, value stocks had mixed performance relative to growth stocks. Small cap value outperformed small cap growth, while large cap value underperformed large cap growth. Along the market capitalization dimension, small caps greatly outperformed large caps in the US and in other developed markets, and narrowly edged large caps in emerging markets.
- Fixed income securities had poor returns in the fourth quarter. Rising long-term rates hurt investors who were exposed to term risk. Long-term securities did more poorly than short-term securities.
- Real estate securities had solid returns but underperformed relative to most other asset classes.
Download PDF – Quarterly Investment Update 12312010
PORTFOLIO FACT SHEETS
The December 31, 2010 Portfolio Fact Sheets have been posted to our website: Portfolio Fact Sheets 12312010
PORTFOLIO FACT SHEETS
The November 30, 2010 Portfolio Fact Sheets have been posted to our website: Portfolio Fact Sheets 11302010
PORTFOLIO FACT SHEETS
The October 31, 2010 Portfolio Fact Sheets have been posted to our website: Portfolio Fact Sheets 10312010.
QUARTERLY INVESTMENT REVIEW
The following is an excerpt from our second quarter 2010 Quarterly Investment Review. The full version has been posted to our website: Quarterly Investment Update 09302010.
- The US equity market rallied strongly in the third quarter, reversing the dismal performance of the second quarter. The broad US market gained over 11% in the quarter, with most asset classes delivering double-digit positive returns.
- Performance in other developed markets was generally good, especially in Scandinavia and Australia. However, there was much dispersion in performance at the individual country level. Ireland, which continues to face severe fiscal and financial problems, and Japan had small positive returns, while the Scandinavian countries all had quarterly returns in excess of 25%. The US dollar lost ground against most major currencies, especially the euro and the Australian dollar, which greatly helped the dollar-denominated returns of developed market equities.
- Emerging markets had even better performance than developed markets, and were the top-performing asset class for the period. As in the case of developed markets, there was much dispersion in the performance of different emerging markets, although most emerging markets managed to end the quarter with double-digit returns. The US dollar also lost ground against the main emerging market currencies in the third quarter, which contributed positively to the dollar-denominated returns of emerging market equities.
- In the third quarter, value stocks underperformed growth stocks across all market capitalization segments in the US and in other developed markets. In emerging markets, on the other hand, value stocks had mixed performance relative to growth stocks. Small cap value stocks outperformed small cap growth stocks, while large cap value stocks underperformed large cap growth stocks.
- Along the market capitalization dimension, small caps narrowly trailed large caps in the US. In other developed markets and in emerging markets, on the other hand, small caps greatly outperformed large caps in the quarter.
- Notwithstanding the continued weakness in the commercial and residential real estate markets, real estate securities had excellent returns in the third quarter and very good performance relative to other asset classes.
- Fixed income securities had good returns in the third quarter. Declining long-term rates rewarded investors who were exposed to term risk. Intermediate government securities and inflation-protected securities did particularly well.
Download PDF - Quarterly Investment Update 09302010
Posted in Market Commentary, Portfolio Management
Tagged Market, Performance, Quarterly, Review
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“HINDENBURG OMEN” FLAMES OUT
Weston J. Wellington, Vice President, Dimensional Fund Advisors
September was a relatively good month for US stocks—total return for the S&P 500 Index was 8.92%, the best September result since 1939. Small cap stocks sparkled as well, with a total return of 12.46% for the Russell 2000 Index, the fifth-best month since inception of the index in January 1979.
Ordinarily, returns in any one month do not provoke much excitement in these quarters, but we couldn’t help noticing that the buoyant performance occurred in spite of a grim prediction by the so-called “Hindenburg Omen.” Attributed to Jim Miekka, a blind physics teacher turned newsletter author, the Omen combines multiple technical indicators tracking moving averages and the number of issues setting new fifty-two-week highs and lows. The Omen allegedly flashed a “sell” signal on Thursday, August 12, and internet chat rooms were buzzing on Friday the 13th about the prospect for a looming disaster in the stock market. Mr. Miekka suggested to a Wall Street Journal reporter that the Omen signaled a “market meltdown” in September.
Many investors are easily persuaded that careful analysis of stock market trading patterns offers valuable clues to the direction of stock prices, and a small army of newsletter publishers caters to this belief. Successful timing models (and newsletter publishers) are conspicuous by their absence, and the persistence of this cottage industry brings to mind Samuel Johnson’s observation on marriage: “the triumph of hope over experience.”
Oddly enough, Professor Eugene Fama can be counted among the participants in the fortune-telling business. One of his first jobs was to conduct research on timing indicators for the publisher of a market newsletter. As a statistics whiz, he had no trouble coming up with technical signals that did very well in predicting major market moves. Unfortunately for fans of timing models, he also found that they worked only on past data, and none of them continued to work once he had identified them.
Fama quickly figured out that the failure of timing signals revealed something important regarding the behavior of stock prices, and the rest is history. But some investors, like alchemists seeking the magic elixir to change lead into gold, cling to the belief that their search for the perfect prediction model will be rewarded.
Steven Russolillio and Tom Kilgore. ” ‘Hindenburg Omen’ Flashes” Wall Street Journal August 14, 2010
Steven Russolillio and Tom Kilgore. ” ‘Hindenburg’ Creator Sticks to His Guns” Wall Street Journal August 26, 2010
Download PDF - “Hindenburg Omen” Flames Out
Posted in Investment Philosophy, Market Commentary, Portfolio Management
Tagged Hindenburg, Market, Timing
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PORTFOLIO FACT SHEETS
The September 30, 2010 Portfolio Fact Sheets have been posted to our website: Portfolio Fact Sheets 09302010
QUARTERLY INVESTMENT REVIEW
The following is an excerpt from our fourth quarter 2010 Quarterly Investment Review. The full version has been posted to our website: Quarterly Investment Update 03312011.
Download PDF – Quarterly Investment Update 03312011