Quarter in Review
S&P 500 Q1 returns totaled 12.59%. Best performance since Q1 1998. Surge fueled by good U.S. economic data, including unemployment rate ticking down and rising consumer spending. U.S small cap stocks underperformed U.S. large cap stocks but still managed a 12.44% gain. In non-U.S. developed markets and emerging markets small caps outperformed large caps. Large value underperformed large growth around the globe. Small value outperformed small growth in the emerging markets and had mixed results in developed markets.
In global markets, the U.S. was one of the best performers (+3.29%), pushing what would have been a March global decline to a slight gain (1.29%). YTD global equity markets (MSCI world index) returned 11.56%. One-year returns are still greatly affected by the U.S., with the MSCI World Index one-year return + 0.56%: ex-U.S., global equity returns are off 6.67% for trailing 12 months.
Interest rates increased in March, reflecting stronger markets. Central banks remained cautious. Home prices in major cities fell. Bernanke says faster growth needed to bolster job market. Federal Reserve minutes suggest no bold action. European Central Bank held its 1% low rate and lowered its expected growth rate for the euro-zone. The Bank of England held its rate flat at 0.5%. The Bank of Japan expanded a loan program to help targeted industries. The 10-year U.S. Treasury increased 24 basis points (bps), closing at 2.22% (from February’s 1.98%, year-end 2011’s 1.88%, 2010’s 3.29% and 2009’s 3.84%).
Year-to-date total return for DFA’s all equity balanced index is + 13.16%. The aggressive 80/20 index is + 9.41%, the normal 60/40 index is + 8.05%, the moderate 40/60 index is + 5.55%, the conservative 20/80 index is + 3.08% and the fixed income strategy is + 0.65%.
In other news, despite lack luster returns, top hedge fund managers reportedly took home $14.4 billion in 2011. No surprise most worker pension funds searching for higher returns, to bridge looming pension short falls, found that riskier investments in private equity and hedge funds failed to pay off. Also, in the wake of Groupon accounting revelation, critics are wary of the JOBS Act. Making it easier for hedge funds and companies to raise capital by relaxing regulations beats common sense.