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Insights



What History Tells Us about the Market and Control of Congress

Nearly a century of US stock market returns suggests that making investment decisions based on control of the chambers of Congress is unlikely to lead to better investment outcomes. From 1926 to 2022, stocks trended higher regardless of whether Democrats or Republicans controlled the House and the Senate, or whether control was mixed. Actions by Congress and the other branches of the federal government may impact returns, but other factors like geopolitical events, interest rate changes, and technological advances do
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Ingenuity and the Investor

A recent news item reported that Frederick Smith intended to step down as Chairman and Chief Executive Officer of FedEx Corp., the largest air freight firm in the world. As a Yale undergraduate in 1965, Smith wrote a term paper for his economics course outlining an overnight air delivery service for urgently needed items such as medicines or computer parts. His professor was not much impressed with the paper, but after a stint in the Air Force, Smith sought to
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So What’s Your Plan for the Bear Market?

A lot of people are stressed out about a lot of things right now. Markets are down. Prices are up for many of the things you need to buy. Interest rates are rising and make it a confusing time to consider buying or selling a house, or making other major financial decisions. This all adds to the stress you may be feeling about your job, the ongoing pandemic, and the health of loved ones. If you’re stressed out about what
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Investing Through Emotions

Rising inflation, interest rate movements, ongoing trade wars, COVID-19 variants, bear market predictions, the Russian attack on Ukraine and heightened geopolitical uncertainty, …that’s a lot to think about. The first quarter of 2022 reminds us all how much uncertainty can fill the world at any given moment— and how little control we have over it all. This perceived lack of control can lead to feelings of anxiety and stress in our everyday lives. One of the best coping techniques is
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Timing is Everything (if It Works)

In or Out? If your asset allocation from a week ago made sense then, what has changed to make it less appropriate today? Avoiding knee-jerk reactions in these scenarios is usually the prudent course. To help quell the fears of those still tempted to temporarily take risk “off the table,” we ran a few experiments to help demonstrate why staying the course has historically been shown to be a good option. It is good to remember that for any market
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Singled Out: Historical Performance of Individual Stocks

KEY TAKEAWAYS Single stocks have a wide range of returns. Only about a fifth of stocks survive and outperform the market over 20-year periods. They delist at a high rate, even those that have been around for a long time and have outperformed the market for 20 years. The chance of any single stock outperforming the market in the future is not meaningfully different when conditioning on its past performance. Many investors end up holding large concentrated positions in single
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Surprisingly Benign: How Stocks Respond to Hikes in Fed Funds Rate

On May 4, the US Federal Reserve increased the target federal funds rate(1) by 50 basis points as part of what the central bank said will be a series of rate increases to combat soaring inflation in the US. Some investors may worry that rising interest rates will decrease equity valuations and therefore lead to relatively poor equity market performance. However, history offers good news: Equity returns in the US have been positive on average following hikes in the fed
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Should You Chase Dividend Stocks to Combat Inflation and Rate Hikes?

KEY TAKEAWAYS With inflation at its highest level in decades and the US Federal Reserve raising interest rates, investors may be wondering whether they should devote more of their portfolios to dividend-paying stocks. There’s no strong evidence that dividend stocks have delivered superior inflation-adjusted performance during periods of high inflation or rising interest rates. Investors can put themselves in a better position to achieve their financial goals by staying disciplined, diversifying broadly, and considering strategies designed to outpace or hedge
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Is It Time to Sell Stocks?

KEY TAKEAWAYS Soaring inflation and record market highs may leave investors wondering whether it’s time to adjust their portfolios. Researchers have examined a wide range of timing strategies based on earnings, dividends, interest rates, economic growth, and more. A recent Morningstar report showed that investors may be better off steering clear of tactical asset allocation strategies and avoiding making short-term shifts among asset classes. After touching record highs in early January, US stocks(1) have slumped, and investors have been confronted
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Navigating Geopolitical Events

The current conflict between Russia and Ukraine is an important reminder that geopolitical risk is a part of investing in global markets. Navigating geopolitical events requires expertise and flexibility. Dimensional’s systematic active approach is designed to adjust to new information in real time, including information about geopolitical events and their potential repercussions for markets. GLOBAL DEVELOPMENTS AND THEIR IMPACT Geopolitical events like military or economic conflicts can affect stock markets in many ways. These events are generally widely followed by
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