2018 Market ReviewSubmitted by Desmond Wealth Management, Inc. on January 12th, 2019
If there’s one thing Dimensional Fund Advisors is unlikely to ever be accused of, it’s having a flair for the dramatic. Then again, that’s why we find their objective insights so appealing, such as this lead-in to their recently released 2018 Market Review:
“After logging strong returns in 2017, global equity markets delivered negative returns in US dollar terms in 2018.”
– Dimensional Fund Advisors 2018 Market Review
In under 20 words, Dimensional offers us a marvelously compact context for considering current events. The underlying message of their review is this: Market volatility happens. (…but so do expected markets returns.)
Come what may in 2019, your work is done if you can embrace this message here and now, and proceed accordingly.
However, can you? Can you stick to an investment plan you’ve already got in place to guide you through stressful times? Unfortunately, most of us find that much easier said than done:
If you can sit quietly after difficult news; if in financial downturns you remain perfectly calm; if you can see your neighbors travel to fantastic places without a twinge of jealousy; if you can happily eat whatever is put on your plate; if you can fall asleep after a day of running around without a drink or a pill; if you can always find contentment just where you are: you are probably a dog.
– Jack Kornfield, PhD, “A Lamp in the Darkness”
Since you are human, susceptible to the same human biases we all experience, we urge you to read the rest of Dimensional’s 2018 Year in Review as an antidote to any investment misgivings you may have now or in the months ahead. Armed with a clear view of the data, you’ll be better positioned to maintain your own portfolio’s exposure to the risks and expected returns capital markets have to deliver over the long haul.
Take, for example, the role of steadfast diversification. Recently outperforming U.S. stock market returns (with “recent” being the past decade) may be causing even resolute investors to wonder: Is it still worthwhile to invest globally?
Dimensional’s report reminds us of the flip-side – the “Lost Decade” of 2000–2009. During that period, the S&P 500 happened to deliver a negative 10-year cumulative total return of −9.1%, even as cumulative international stocks were positive, and emerging market stocks shot through the roof, comparatively speaking. Not surprisingly, many investors were wondering exactly the opposite question by the end of that decade: Was it still worthwhile to invest in the U.S.?
That’s market volatility for you. We cannot know which asset class will delight or disappoint next. We only know some will always do better than others for a while, but in a fashion that can only be described as random. This creates an environment best addressed through global diversification, customized according to your own circumstances.
In short, in markets that can otherwise feel like bedlam, our mission and Dimensional’s remain aligned: We seek to offer a consistent voice of evidence-based reason. That’s why we’re sharing Dimensional’s 2018 Market Review with you today. It’s also why we stand by to advise you in your quest to earn and preserve personal wealth during confusing times (which is to say, almost always).
Please be in touch any time we can answer questions, allay concerns, or otherwise be of assistance to you and yours.