It continues to be a great year for the stock market with large company stocks up 27.3% through the end of November. A broad bond portfolio was up about 2.7% year to date. Real estate is up 14.9%. Commodities have seen a modest return of 0.4% year to date.
Let’s drill down into different types of investments. The table below shows returns for investable ETFs representing the most common investment types. We like to use ETFs versus indices to evaluate returns as they include transaction cost and fees while indices do not. In this update we will examine the performance of each major investment type through the end of November 2024.
Stocks
Large company U.S. stocks were up substantially quarter to date and year to date. Large cap stocks had a 27.3% return year to date. Technology stocks have lagged a bit but maintained a 23.9% year to date return. Value and fundamentally weighted ETFs, such as VTV and FNDX, have done well but lag large stocks overall.
International stocks have not done well so far this quarter with about a 6% decline. They are up 5 to 6% year to date but lag U.S. markets. Small company stocks outperformed large stocks for the last two quarters and are now up 21.1% year to date.
Overall, a very strong quarter to date and year to date performance for stocks this year.
Bonds
The bond market overall was up 2.7% year to date. Shorter term bonds have done better at 3.6% and remain the highest yielding maturity. The sweet spot in bonds is 4 month to 6 month T-bills currently but rates are starting to come down.
Alternative Investments
Alternative investments can include real estate, commodities, private capital, and a variety of other investments. Here we include two traded ETFs representing real estate (VNQ) and commodities (DBC). Real estate was up substantially year to date with a return of almost 15%. Commodities have a had a modest return as inflation has come down.
Diversified Portfolios
There are some iShares ETFS representing different levels of diversification from about 40% stocks and 60% bonds to 80% stocks and 20% bonds. Most diversified investors have portfolios with between 60% and 80% stocks depending on their ability and willingness to take risk. These diversified portfolios were all up year to date with returns from about 7.9% for a 40% stock portfolio to about 15.7% for an 80% stock portfolio.
Looking Forward
Thus far the Federal Open Market Committee has managed to slow the economy down by raising interest rates without pushing the economy into a recession. Risk remains that they could keep rates high for too long or that other events might cause a U.S. or global recession. Overall U.S. stocks are still priced at a high level relative to history. I would therefore expect more modest stock returns over the coming years even though the Fed has started to lower rates.