March deviated from the norm with the S&P 500 index not beating 90% of fund returns — it was more in the middle of all stock fund categories with a still respectable 3.22% gain. It seems the longstanding outperformance of the top growth stocks may be waning. Bonds had a moderate showing, though recently, rising inflation fears have caused rates to spike, driving most bond funds down for the year.
The broader global market performance has bolstered our results, but troubling signs are emerging, primarily in the bond market. It’s been a volatile year for bonds, dipping to near 2022 lows in early April. Long-term government bond funds are now down about 10% for the year, following a 3% return in 2023 and a harsh 30%+ decline in 2022. Since the peak in 2022, longer-term bonds and bond funds have dropped nearly 50% from their high. Surprisingly, investment in bonds continues as investors rush to secure higher rates before a potential Federal Reserve rate drop.
Inflation has persisted longer than investors and the Federal Reserve had hoped. Commodities are surging, and interest rate hikes haven't quelled the housing market. Notably, investors are gravitating back towards speculative assets, from cryptocurrencies to high-risk growth stocks without earnings — sectors that plummeted after the Covid-related bubbles.
Recently, larger tech stocks have faltered, with Tesla [TSLA] down approximately 30% for the year after recovering from the last significant drop. Even the formidable Apple [AAPL] has seen declines this year. These stocks are influential in most indices. Some downward pressure comes from the ongoing debate over China, but there's also the potential for stricter global antitrust regulations that could hamper the aggressive business practices of market leaders.
Renewed inflation concerns drove precious metals funds up nearly 20% last month, outperforming even hot crypto-related funds. It's notable that the 15-year return on precious metals funds averages nearly zero, with the 10-year returns barely outpacing inflation.
Energy also surged as rising oil prices signal a robust economy that seems indifferent to rate changes or even a sluggish global economy.
In our own portfolios, we've seen some unexpected winners. Vanguard Value Index (VTV) was up 5.17% as investors seem to be embracing value once more. Our previously underperforming LeatherBack L/S Alt. Yld. (LBAY) leapt 4.73% as shorting popular stocks like Tesla began to yield results. This fund last performed well when lesser-quality stocks declined, but it's been lackluster during the resurgence of speculation. Vanguard Market Neutral (VMNFX), a fund we use in some client accounts, has adopted a more rewarding strategy of long positions in solid stocks versus shorting speculative ones, although this fund struggled during the speculative frenzy of the Covid era.
Most of our funds that focused on international markets outperformed the US market, except Franklin FTSE Brazil (FLBR), which was down 1.29%. Considering the relative weakness of the global economy compared to the US, this is a favorable outcome for us. The strengthening US dollar, bolstered by high rates compared to likely rate cuts abroad, has weighed on iShares JP Morgan Em. Bond (LEMB), down 0.26% last month.
Rising rates aren’t just bad for bonds. If long-term rates go back up over 5% and mortgages hit over 8%, we probably won’t see stocks hold up. The recent stock rally was built on hopes that inflation and rates would drop while the economy stayed solid.
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March deviated from the norm with the S&P 500 index not beating 90% of fund returns — it was more in the middle of all stock fund categories with a still respectable 3.22% gain. It seems the longstanding outperformance of the top growth stocks may be waning. Bonds had a moderate showing, though recently, rising inflation fears have caused rates to spike, driving most bond funds down for the year.
Our Conservative portfolio gained 2.18%, and our Aggressive portfolio saw a 1.91% increase in March. Benchmark Vanguard funds for March 2024 were as follows: Vanguard 500 Index Fund (VFINX), up 3.21%; Vanguard Total Bond Index (VBMFX), up 0.82%; Vanguard Developed Mkts Index (VTMGX), up 3.53%; Vanguard Emerging Mkts Index (VEIEX), up 1.57%; and Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 2.41%.
The broader global market performance has bolstered our results, but troubling signs are emerging, primarily in the bond market. It’s been a volatile year for bonds, dipping to near 2022 lows in early April. Long-term government bond funds are now down about 10% for the year, following a 3% return in 2023 and a harsh 30%+ decline in 2022. Since the peak in 2022, longer-term bonds and bond funds have dropped nearly 50% from their high. Surprisingly, investment in bonds continues as investors rush to secure higher rates before a potential Federal Reserve rate drop.
Inflation has persisted longer than investors and the Federal Reserve had hoped. Commodities are surging, and interest rate hikes haven't quelled the housing market. Notably, investors are gravitating back towards speculative assets, from cryptocurrencies to high-risk growth stocks without earnings — sectors that plummeted after the Covid-related bubbles.
Recently, larger tech stocks have faltered, with Tesla [TSLA] down approximately 30% for the year after recovering from the last significant drop. Even the formidable Apple [AAPL] has seen declines this year. These stocks are influential in most indices. Some downward pressure comes from the ongoing debate over China, but there's also the potential for stricter global antitrust regulations that could hamper the aggressive business practices of market leaders.
Renewed inflation concerns drove precious metals funds up nearly 20% last month, outperforming even hot crypto-related funds. It's notable that the 15-year return on precious metals funds averages nearly zero, with the 10-year returns barely outpacing inflation.
Energy also surged as rising oil prices signal a robust economy that seems indifferent to rate changes or even a sluggish global economy.
In our own portfolios, we've seen some unexpected winners. Vanguard Value Index (VTV) was up 5.17% as investors seem to be embracing value once more. Our previously underperforming LeatherBack L/S Alt. Yld. (LBAY) leapt 4.73% as shorting popular stocks like Tesla began to yield results. This fund last performed well when lesser-quality stocks declined, but it's been lackluster during the resurgence of speculation. Vanguard Market Neutral (VMNFX), a fund we use in some client accounts, has adopted a more rewarding strategy of long positions in solid stocks versus shorting speculative ones, although this fund struggled during the speculative frenzy of the Covid era.
Most of our funds that focused on international markets outperformed the US market, except Franklin FTSE Brazil (FLBR), which was down 1.29%. Considering the relative weakness of the global economy compared to the US, this is a favorable outcome for us. The strengthening US dollar, bolstered by high rates compared to likely rate cuts abroad, has weighed on iShares JP Morgan Em. Bond (LEMB), down 0.26% last month.
Rising rates aren’t just bad for bonds. If long-term rates go back up over 5% and mortgages hit over 8%, we probably won’t see stocks hold up. The recent stock rally was built on hopes that inflation and rates would drop while the economy stayed solid.