as of September 30, 2018
Global markets were in positive territory for the quarter ended September 30, 2018. The gains were largely due to the performance of U.S. stocks as increasing profits and a strengthening economy outweighed investor concerns about rising interest rates, higher inflation, and trade tensions. Concerns about Italy's debt and Europe's economic markets led to muted returns for European stocks. Emerging-market stocks, hurt by a rising dollar and trade protectionism, declined and trailed their developed-market counterparts.
The overall U.S. fixed income market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, returned 0.02% for the second quarter after returning –0.16% for the first quarter. Yields rose and prices declined as investors remained concerned about the possibility of inflation and the possibility that the Federal Reserve would more aggressively raise rates.
The Fed did raise rates in September– its eighth 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 another one in December.
U.S. bond market
- The overall U.S. fixed income market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, returned 0.02% for the third quarter of 2018. Corporate bonds, as measured by the Bloomberg Barclays U.S. Credit Index, returned 0.89% while U.S. Treasuries, as measured by the Bloomberg Barclays U.S. Treasury Index, returned –0.59%.
- The yield of the benchmark 10-year Treasury note closed September at 3.06%, up from 2.33% a year earlier.
U.S. stock market
- The CRSP U.S. Total Market Index, the benchmark for Vanguard Total Stock Market Index Fund, returned 7.08% for the quarter and 17.62% for the 12 months ended September 30. For the quarter, nine of the fund's ten industry sectors produced positive results, with healthcare, consumer discretionary, and energy contributing the most to results. For the 12 months, all ten sectors advanced. Technology, consumer services, and healthcare were the strongest performers.
- Money market yields continued to rise. Vanguard Federal Money Market Fund’s average weighted maturity on September 30 was 56 days. The fund maintained its high-quality portfolio and continued to benefit from broad diversification and low fees.
International stock market
- Overall, the performance of international stocks was muted for the third quarter. Stocks in the Asia-Pacific region and Europe trailed their U.S. counterparts. Stocks in emerging markets were in negative territory.
- The Spliced Emerging Markets Index fell –1.87% for the quarter because of rising dollar and the reemergence of trade-war concerns. For the 12 months ended September 30, the index was down –2.81%.