Benchmark Returns for the Period Ended December 2019
| Annualized | ||||
|---|---|---|---|---|
| Quarter | 1 Year | 5 Year | 10 Year | |
| US Treasury Bills (one month) | 0.41% | 2.14% | 0.99% | 0.52% |
| Barclays Capital US Gov’t/Credit Inter Bond | 0.37% | 6.80% | 2.57% | 3.05% |
| Standard & Poor’s 500 | 9.07% | 31.49% | 11.70% | 13.56% |
| Russell 1000 Value (large cap value) | 7.41% | 26.54% | 8.29% | 11.80% |
| Russell 2000 (small cap) | 9.94% | 25.52% | 8.23% | 11.83% |
| Morgan Stanley Europe, Australasia and Far East (EAFE) | 8.17% | 22.01% | 5.67% | 5.50% |
| MSCI Emerging Markets Index | 11.84% | 18.42% | 5.61% | 3.68% |
| Wilshire REIT | -1.14% | 25.76% | 6.87% | 11.94% |
| Source for returns: Morningstar TM as of 12/31/2019. | ||||
Quarterly Commentary
Global equity markets posted strong returns for the fourth quarter of 2019. Domestic equities (as measured by the S&P 500) returned 9.07%, international equities (as measured by the MSCI EAFE Index) returned 8.17%, and emerging markets (as measured by the MSCI Emerging Markets Index) returned 11.84%. Real Estate Investment Trusts (REITs), which delivered stellar returns for most of 2019, were the only equity asset class to decline in the fourth quarter.
As a whole, 2019 was a strong year for risk assets. Domestic equities led the way, with the S&P returning 31.49% for the year. International markets were up 22.01% for the year and emerging markets returned 18.42% – an impressive turnaround following the negative returns experienced in 2018.
Fixed income returns were also strong for 2019, with intermediate bonds returning 6.8% (as measured by the Barclay’s US Gov’t/Credit Intermediate Bond Index). The Federal Reserve reduced the fed funds rate three times amid concerns about tepid economic growth and minimal inflation. This led to a brief period when the yield curve inverted slightly. While the yield curve is still relatively flat by historical standards (with 2-year US Treasuries yielding 1.59% and 10-year US Treasuries yielding 1.92%), the mild inversion experienced earlier in 2019 dissipated in the fourth quarter.
Political uncertainty remained during the fourth quarter. Internationally, positive news regarding trade discussions between the US and China emerged; it appears that both countries are motivated to take constructive action sooner rather than later. Domestically, 2020 is an election year and, as we learned in 2016, making predictions now could be a fool’s errand. During the 23 US presidential election years since 1928, the average return of the S&P 500 is above 10%. Put another way, it is all but impossible to see a statistical difference in investment returns between election and non-election years, although financial pundits will spend the majority of 2020 claiming to have found one. More important than the election process itself is sticking to your long-term investment goals regardless of who the front-runner is from week to week.
As we enter the 2020s, the only certain thing is uncertainty. Equity markets will have some up years and some down years, and we will face plenty of challenges. Uncertainty is the price of admission for earning positive investment returns.
Whether you consider 2020 to be the end of one decade or the beginning of another, all of us at Resource Consulting Group look forward to providing you guidance during the next ten years and beyond.
If you have thought about becoming a client or would like a second opinion on your current holdings, please contact us via the button below and we would be glad to assist you in achieving your financial goals.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. The index returns above assume reinvestment of all distributions. This information is for educational purposes only and should not be considered investment advice or an offer of any security for sale.
