If there was a key theme to take from this quarter’s mixed-bag of news, views and market reviews, it’s the wisdom of keeping one’s investments globally diversified in a world that never quits.
In last quarter’s Q4 2015 report, the US equity market outperformed developed non-US and emerging markets. US Real Estate Investment Trusts (REITs) recorded the highest returns, outperforming equity markets. And while the value effect was negative nearly everywhere you turned, small-cap stocks outperformed large-caps internationally, but not in the US. The bond market was slightly down in the US and slightly up in global markets elsewhere.
This quarter, several tables were turned. Emerging markets outperformed developed markets, including the US. The value effect was positive in the US and emerging markets. Bond markets were up nicely all around the world.
Next quarter? As you’ve probably already surmised, that’s anybody’s guess. In his “Free Throw” reflections toward the end of this quarter’s review, Dimensional’s David Butler thinks back to his days as a college and professional basketball player, before he became head of the firm’s global financial services. He describes how great athletes become great by focusing on the process instead of the challenges immediately at hand.
“The example could involve a great violinist, a world-class chef, or even a gardener,” he says. “In each case, there is a story of discipline behind the person who continually works to perfect the craft and a reminder of how a successful investor can do the same.”
By implementing a disciplined process for remaining globally diversified, investors stand the best odds for picking up those market “free throws,” whenever and wherever they may next occur.
Open PDF: Dimensional’s Q1 Quarterly Review