In Q2 2021 we continued to ride the “Pandemic Recovery”. Recovery returns have moderated from “exceptional” to “very good”. The portfolios and benchmark indices ranged from 3.8% to 8.5% return for the quarter. Financial planners assume long term 8% annual return, or 2% per quarter. So put this one in the plus column as another quarter “we like a lot”.
All major global stock/bond indices were up. Best were global/US REITs up more than 10%, US stocks 8.2%. Going back 12 months, global stock indices were up 33.6% to 44.2%. Bonds were flat last 12 months.
The small/value premiums that we enjoy are still outperforming looking over the last 6 months and 12 months, but were not in favor for the quarter.
For example:
US. Q2 2021 Small/Value: +4.3% Large/Growth: +11.9%
US. 12 Months ending 6/30/2021 Small/Value: +73.3% Large/Growth: 42.5%
This is a great demonstration of how any long term expected return from a particular slice of the market cannot be predicted; it is often swift and significant. The only way to enjoy that large return is to have exposure to it at all times. Diversification!
2021 year-to-date returns of the model portfolios ranged from 6.1% to 15.8% - outstanding. and for the 12 months ending 6/30/2021 from 18.0% to 45.3%.
Any prediction is a guess, as we know from 100 years experience.
Our prediction which will be proven out in the long run is that returns will be up and down short term and up long term. We have confidence that people, with their brain power and hard work; their desire to make progress each day, take care of their families and prepare for the future will cause the economy to grow long term.
We expect the corporate earnings reports coming out in July/August will be very positive, surprising on the upside, as the economy continues ramping up after the government policy induced recession.
As always, the market will react in both directions from unexpected “news”, and more than one would anticipate. Ultimately, the ability of companies to generate profits and income will drive the market higher long term.
See our 2-page performance summary of our model portfolios here. Want to dig in deep? See the Q2 2021 Market Review here.