Q3 Markets Data Report

Let me summarize. EVERYTHING was down in Q3. Equities. Bonds. US. Developed Markets. Emerging Markets.

The S&P 500 suffered its largest monthly loss of the year in September at -4.87% bringing the YTD performance to 11.86% (through end of Q3).

As usual though, zooming out provides a different story. Everything is positive at the 1-year, 5-year, and 10-year levels.

We think the important takeaway for the quarter is on page 15 in the linked report below and continue to position our clients towards global value (especially towards the small end of the cap range) as we believe it has the highest opportunity for outsized returns going forward.

The first half of 2023 marks the tenth time since 1926 that value stocks have underperformed growth stocks by more than 20 percentage points over a two-quarter period. More often than not, value has responded like the hero in an action movie, beating growth over the following four quarters in seven of the nine previous instances and averaging a cumulative outperformance of nearly 29 percentage points.

Wes Crill, PhD, Sr. Investment Director and VP, Dimensional Fund Advisors

In fact, our core portfolio positioning changes announced in our Q1 2023 newsletter (towards global small value) benefited us in Q3 across the board.

In the US, small value outperformed other sectors.

Internationally, Value outperformed growth substantially.

And in Emerging Markets, Value outperformed growth.

We are continuing with the core allocation we laid out earlier this year. In fact, we're even more convinced that the largest "margin of safety" and "opportunity for growth" co-exist in globally diversified small value, so that's where we're concentrated.