We've closed out yet another quarter with positive returns in the market. This year is far exceeding an "average rate of return."
Small cap stocks have continued to show strength with the Russell 2000 Index generating 4.29% for the 2nd quarter, but the S&P 500 Index pulled ahead with an 8.55% rate of return.
Value stocks are in the middle of the pack this quarter with a 5.21% rate of return for the second quarter.
International developed stocks just barely pulled ahead of emerging markets stock and are posting 5.17% returns for the quarter. Emerging markets stock was close behind at 5.05%.
Bonds saw positive returns this quarter after losing money for the first quarter of the year. However, at 1.83% for the second quarter, they are still not quite in positive territory for the year. We continue to see the effects of interest rate fluctuations on our bond funds. Our recommendations to avoid longer-term bonds hold especially true during these times, as longer-term bonds take longer to recover from interest rate bumps. Though these bonds may hold the opportunity for a slightly higher interest rate, they simply aren't worth the risk.
We're receiving many questions from our clients regarding inflation right now. For now, we view this as a temporary issue as we come out of the pandemic. The headline numbers are impacted by the comparison months last year when the economy was shut down, and we're still seeing pandemic-related supply chain issues. In our financial plans, we plan for inflation and factor it into client investment allocations. Holding some stock in your portfolio along with inflation-protected bonds provides a good measure of protection. We continue to monitor the situation and make recommendations on portfolio changes as needed on an individual basis. For now, our recommendation is to continue to stay the course and to rebalance your portfolio regularly.
*Source for investment returns is Morningstar as of June 30, 2021. S&P 500 TR USD for S&P 500. Russell 2000 TR USD for small cap stock. Russell 1000 Value TR USD for value stocks. MSCI EAFE NR USD for developed international markets. MSCI EM NR USD for emerging markets stock. BBgBarcUS Agg Bond TR USD for the US aggregate bond index.