For the first time in a decade, the S&P 500 Index posted a calendar year loss. Meantime, the domestic investment-grade fixed income market barely managed to turn positive for the year, the primary savior likely having been a flight to safety wrought by the equity market’s decline. The recent, rather sharp rebound in equities has us thinking investors found the selloff overdone. Still, we’d hesitate to offer the all’s clear. But, while we do find a range of reasons for going-forward caution, neither further volatility, nor a reasonably positive gain for 2019 will surprise us....Video may take a moment to load. Please press play to begin. Perhaps best viewed in full screen...

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Investing involves risks including the possible loss of principal. Past performance is not indicative of future results.
One cannot invest directly in an index. Index performance does not reflect the expenses associated with the management of an actual portfolio. One cannot invest directly in an index. Index performance does not reflect the expenses associated with the management of an actual portfolio. Where noted, total return index performance reflects the reinvestment of dividends, but does not reflect the expenses associated with the management of an actual portfolio. Where noted, price return index performance does not reflect the reinvestment of dividends and does not reflect the expenses associated with the management of an actual portfolio.
The Dimensional US Small Cap Index is a market-capitalization-weighted index of securities of the smallest U.S. companies with market capitalizations that fall in the lowest 8% of the total market capitalization of the Eligible Market. The Eligible Market is composed of securities of U.S. companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market. Exclusions from that list include non-US companies, REITs, UITs and investment companies.
Fama/French US Value Research Index: Provided by Fama/French from CRSP securities data to Dimensional Fund Advisors. The index includes the lower 30% in price-to-book of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973).
Fama/French US Growth Research Index: Provided by Fama/French from CRSP securities data to Dimensional Fund Advisors. The index includes the higher 30% in price-to-book of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973).
Domestic (U.S.) fixed income (Fixed Income Aggregate): The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. Components of the index include Treasury, Corporate, Agency and Securitized bonds. The Bloomberg Barclays U.S. 1-5 Year Government/Credit Bond Index is a broad-based benchmark that includes investment grade, U.S. dollar-denominated, fixed-rate Treasuries, government-related and corporate securities with maturities between 1 and 5 years.
The MSCI All Country World Index (ACWI) captures large- and mid-cap representation across 23 Developed Markets and 23 Emerging Markets countries. The index covers approximately 85% of the global investable equity opportunity set. May be referred to as “global”, “global equity” and/or “global stocks”. “Value” and “Growth” versions of this index are constructed as described in the “MSCI Value and Growth Indexes” note below.
The MSCI ACWI ex. USA Investable Market (IMI) Index captures large- and mid-cap representation across 22 Developed Markets countries and 24 Emerging Markets countries. The index covers approximately 99% of the global equity opportunity set outside the U.S. May be referred to as “World ex. U.S.”, “international equity”, “international stocks” and/or “All Stocks” in a section specifically describing only international stocks. “Value” and “Growth” versions of this index are constructed as described in the “MSCI Value and Growth Indexes” note below.
The MSCI ACWI ex. USA Small Cap Index captures small-cap representation across 22 Developed Markets countries (excluding the U.S.) and 23 Emerging Markets countries. The index covers approximately 14% of the global equity opportunity set outside the U.S. May be referred to as international small-cap stocks, “ World ex. U.S. Small-Cap”, and/or “Small” in a section specifically describing only international stocks. “Value” and “Growth” versions of this index are constructed as described in the “MSCI Value and Growth Indexes” note below.
Developed markets equity (stocks): The MSCI EAFE Index captures large- and mid-cap representation across Developed Markets countries around the world, excluding the United States and Canada. The index covers approximately 85% of the free float-adjusted market capitalization in each country. May be referred to as “Developed Markets”. “Value” and “Growth” versions of this index are constructed as described in the “MSCI Value and Growth Indexes” note below.
Emerging markets (EM) equity (stocks): The MSCI Emerging Markets Index captures large- and mid-cap representation across 23 Emerging Markets countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country. May be referred to as “Emerging Markets”. “Value” and “Growth” versions of this index are constructed as described in the “MSCI Value and Growth Indexes” note below.
MSCI Value and Growth Indexes: The value investment style characteristics for MSCI index construction are defined using the following variables: book value to price, 12-month forward earnings to price and dividend yield. The growth investment style characteristics are defined using the following variables: long-term forward earnings per share (EPS) growth rate, short-term forward EPS growth rate, current internal growth rate, long-term historical EPS growth trend and long-term historical sales per share growth trend. The objective of the MSCI Value and Growth Indexes design is to divide constituents of an underlying market capitalization index into a value index and a growth index, each targeting 50% of the free float-adjusted market capitalization of the underlying index. The market capitalization of each constituent should be fully represented in the combination of the value index and the growth index, and, at the same time, should not be double-counted. One security may, however, be represented in both the value index and the growth index at a partial weight.
Domestic (U.S.) equity: The S&P Composite 1500 combines three leading indices, the S&P 500, the S&P MidCap 400, and the S&P SmallCap 600 to cover approximately 90% of the U.S. market capitalization. The S&P Composite 1500 Value Index is composed of those stocks exhibiting relatively stronger Value characteristics among the constituents of the S&P Composite 1500 Index. The S&P 500 Composite 1500 Index is composed of those stocks exhibiting relatively stronger Growth characteristics among the constituents of the S&P Composite 1500 Index. May be referred to as “All Stocks” in a section specifically describing only U.S. stocks.
Domestic (U.S.) large-cap equity: The S&P 500 Index measures the performance of the large-cap segment of the U.S. equity market. The S&P 500 Value Index is composed of those stocks exhibiting relatively stronger Value characteristics among the constituents of the S&P 500 Index. The S&P 500 Growth Index is composed of those stocks exhibiting relatively stronger Growth characteristics among the constituents of the S&P 500 Index. May be referred to as “Large” in a section specifically describing only U.S. stocks.
Domestic (U.S.) mid-cap equity: The S&P MidCap 400 Index measures the performance of the mid-cap segment of the U.S. equity market. The S&P MidCap 400 Value Index is composed of those stocks exhibiting relatively stronger Value characteristics among the constituents of the S&P MidCap 400 Index. The S&P MidCap 400 Growth Index is composed of those stocks exhibiting relatively stronger Growth characteristics among the constituents of the S&P MidCap 400 Index. May be referred to as “Mid” in a section specifically describing only U.S. stocks.
Domestic (U.S.) small-cap equity: The S&P SmallCap 600 Index measures the performance of the mid-cap segment of the U.S. equity market. The S&P SmallCap 600 Value Index is composed of those stocks exhibiting relatively stronger Value characteristics among the constituents of the S&P SmallCap 600 Index. The S&P SmallCap 600 Growth Index is composed of those stocks exhibiting relatively stronger Growth characteristics among the constituents of the S&P SmallCap 600 Index. May be referred to as “Small” in a section specifically describing only U.S. stocks.
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Publication: 01.24.19 2019-SRCM-11