This report features world capital market performance and a timeline of events for the past quarter. It features a global overview and the returns of stock and bond asset classes in the US and international markets. The report also illustrates the impact of globally diversified portfolios.
The start of a new year is a great time to reflect on the past, set goals for the future, and tune out predictions from the financial industry.
The S&P 500 Index rose by 23.3% in 2024. This far exceeded expectations from analysts polled at the end of 2023, none of whom believed the S&P would grow by its historical average rate of return, 12.3%. In fact, nearly half of the analysts predicted a negative year for the index. Hopefully those analysts didn’t eat their own cooking and divest from US stocks during such a strong year.
The dispersion in predictions for 2024 highlights the challenge with making asset allocation decisions based on forecasts. Individuals arrive at different expectations because they may see the world differently. The market aggregates these disparate viewpoints, offering a wisdom of the crowd that’s very difficult to beat.
If Eeyore were a value investor, he would probably be among those who feel that a positive value premium can only come at the cost of a growth stock tumble. This view implies value stocks can post strong relative returns only because growth stocks underperformed, not because value delivered strong absolute performance. While growth underperformance was the case for July’s US value premium resurgence, this has not been the norm for the value premium historically.
Since 1927, US value stocks outperformed US growth stocks in 58 out of 97 calendar years. During positive value premium years, growth stocks returned an average of 10.25% compared to their average across all years of 11.86%—lower, but not exactly a tank job. Only in 17 out of 58 of positive value premium years was growth’s return negative. On the other hand, value’s average return in positive value premium years, 25.08%, markedly exceeded its long-run average return, 15.93%.
Many US investors question allocating to non-US stocks because the US market has performed so strongly for more than a decade. From January 2010 through December 2023, the S&P 500 Index returned 13.12%, beating the MSCI All Country World ex USA Index by an annualized 8.5 percentage points.
The history of country market performance says investors shouldn’t count on one country’s market remaining on top. But some investors look for stories supporting why the US is different and might continue its dominance. One increasingly popular belief is that the US is particularly friendly to businesses, attracting the best proprietors and subsequent innovation.
The premise that the US leads the way in business friendliness is up for debate. The Heritage Foundation’s business freedom scores rank countries on subjective criteria like regulatory environment, business risk, and access to electricity. The US ranked 13th out of 22 developed countries in 2023.1
This year marks the 15th time I’ve had the opportunity to vote for our nation’s leader. When I was growing up in Kansas, my family instilled in me the importance of casting your ballot. It’s a civic responsibility I continue to take seriously.
In many ways, this year’s presidential election feels like the most unusual one yet. In just the past few months, we’ve seen the attempted assassination of a former president who’s running again, the withdrawal of an incumbent president, and the elevation of a sitting vice president. Pollsters and commentators are still trying to make sense of the changes and what they might mean for the US and the global community. We have deep cultural divisions, the economy’s still recovering from the effects of a global pandemic, and there are heightened geopolitical tensions around the world. For many voters, this moment feels historic.
And yet as an investor, I’m fully confident in the long-term prospects for the stock market. And I know investors will continue to have opportunities to pursue their financial goals no matter who wins the White House, which party controls Congress, or what stocks do in November. Why am I so confident in this prediction? Because of history, and because of people.
John “Mac” McQuown, a founding Director of Dimensional Fund Advisors in 1981, was a financial engineer, entrepreneur, and environmentalist with an insatiable curiosity and relentless drive that led him to start more than a dozen companies in his lifetime.
A self-described “data dog,” Mac was a pioneer in the transformation of investing from guesswork into a science guided by academic research.
In the 1970s, he assembled a team at Wells Fargo Bank that developed one of the first index funds—the investment vehicle whose rise would later revolutionize the financial world. And after helping launch Dimensional, Mac remained on the company’s board while he pursued interests that ranged from bond-investing innovations to sustainable farming to wine making. He died on October 22, 2024, at age 90. He is survived by his wife, Leslie, his son, Morgan, and his daughter-in-law, Alexa.
“To bring about fundamental change, you need great thinkers and researchers, but you also need implementers,” Dimensional Founder David Booth told Bloomberg Markets magazine in 2015. “People like Mac don’t win Nobel Prizes; they implement the ideas of the guys who do.” The descriptions of his life in this article are based on years of written and recorded recollections from Dimensional employees and others associated with the firm, except where otherwise noted.
