One of the reasons we enjoy sharing Dimensional Fund Advisors periodic insights is for the clear-eyed light they shed on market news, whether good or bad, near or far.
Case in point: As Dimensional wrote in its Market Review 2022, “The world gave financial markets a lot to process.”
That’s a polite way of saying not much went as hoped for, for most investors. Global stock and bond markets declined simultaneously, while inflation raged and Russia roared. “Worst since” and “worst ever” scenarios were the dominant theme among annual returns.
And yet, while 2022 was disappointing across many fronts, there are also some fascinating facets to explore, as Dimensional does in its Market Review.
READ THE FULL REPORT: DIMENSIONAL’S MARKET REVIEW 2022
In particular, the data across decades remains crystal clear: Years like 2022 have happened before, and will probably happen again. But in most years (by far), markets have delivered positive returns, with stocks outperforming bonds.
This is why we construct and manage our portfolios utilizing an evidence-driven process, to capture long-term expected returns while managing the risks involved. It’s why we still depend on global diversification and thoughtful asset allocation as our guides. It’s why we intend to continue doing the same moving forward.
It’s also why we continue to integrate value stock tilts where appropriate into our investment strategies. No matter how you invested in 2022, few portfolios delivered positive returns. But those tilted toward value stocks declined considerably less than those bulked up on big tech, and other growth stocks. As Dimensional wrote, “While markets were down as a whole, value stocks were a bright spot for investors.”
We encourage you to read Dimensional’s 2022 Market Review for yourself. There are many interesting insights about the year just ended. The report also offers a level-headed perspective on why there is ample room for investor optimism in the years ahead.
We agree with this perspective, as well as the authors’ observation: “A look back at recent history makes a case for sticking with a plan.”
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