as of March 31, 2018
Global stock markets tumbled over the quarter ended March 31, 2018. After a strong start, U.S. stocks fell into negative territory and were hurt by concerns about rising interest rates and higher volatility. Emerging markets outpaced developed markets and were the only major region where equity markets advanced for the period.
The bond market over the first quarter was marked by rising rates and an upswing in volatility. Prices initially fell as the yield of the 10-year U.S. Treasury note rose for the third consecutive quarter, as expectations surged for growth and inflation in the wake of the $1.5 trillion tax cut bill enacted in December. But prices rebounded somewhat in March as the rise in yields stalled, in part because subsequent inflation data were weaker than expected. (Bond prices and yields move in opposite directions.)
The Federal Reserve raised interest rates in March—its sixth increase since the current tightening cycle began—and signaled more hikes to come. Attention is now focused on the pace of rate increases for the rest of 2018, with many analysts expecting no more than two additional increases this year.
U.S. bond market
- The overall U.S. fixed income market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, returned –1.46% for the first quarter of 2018. Treasuries outpaced corporate bonds, which returned –2.32%.
- The yield of the benchmark 10-year Treasury note closed March at 2.74%, up from 2.39% a year earlier.
U.S. Stock market
- U.S. stocks declined for the quarter.
- The CRSP U.S. Total Market Index, the benchmark for Vanguard Total Stock Market Index Fund, returned –0.60% for the quarter but rose 13.87% for the 12 months ended March 31. For the quarter, all but two of its ten industry sectors declined, with telecommunications, basic materials, and oil and gas falling the most and technology and consumer services producing positive results. For the 12 months, eight sectors advanced; technology, health care, and materials posted the highest returns, while oil and gas and telecommunications declined.
- Money market yields continued to rise. Vanguard Federal Money Market Fund’s average weighted maturity on March 31 was 88 days. The fund maintained its high-quality portfolio and continued to benefit from broad diversification and low fees.
International stock market
- Overall, international stocks trailed U.S. stocks over the first quarter. But emerging markets outperformed their U.S. counterparts as stocks in those markets continued to benefit from, among other factors, a weaker U.S. dollar.
- The Spliced Emerging Markets Index climbed 1.29% for the quarter and 20.58% for the 12 months. For the quarter, it was ahead of both European markets and developed Pacific markets.
TIFF Multi-Asset Pool
- TIFF Multi-Asset Pool performance for the quarter was 3.23% lower than the CPI+5 index and 0.08% lower than the Constructed Index and 0.31% higher than the 65/35 Mix.
- TIFF Multi-Asset Pool returns are based on the total returns of the underlying investments, net of three components:
- The fund's expenses
- Change in share price
- Reinvestment of dividends and capital gains