as of December 31, 2018
Global stock markets fell and volatility rose substantially over the quarter ended December 31, 2018. Investor concerns about slowing global growth, rising U.S. interest rates, and heightened geopolotical uncertainty led to sharp declines across major equity markets.
Fixed income markets, as measured by the Bloomberg Barclays Global Aggregate Bond Index, returned 1.20%. In December, the Federal Reserve raised rates for the fourth time in 2018, but lowered its guidance for rate hikes in 2019. The European Central Bank held rates constant while ending its quantitative easing in December. The U.S. dollar strengthened against most other major currencies except for the Japanese yen. The dollar's upturn curbed returns from most international holdings.
U.S. bond market
- The overall U.S. fixed income market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, returned 1.64% for the fourth quarter of 2018. Corporate bonds, as measured by the Bloomberg Barclays U.S. Credit Index, returned –0.01% while U.S. Treasuries, as measured by the Bloomberg Barclays U.S. Treasury Index, returned 2.57%.
- The yield of the benchmark 10-year Treasury note closed December at 2.68%, up from 2.41% a year earlier.
U.S. stock market
- The CRSP U.S. Total Market Index, the benchmark for Vanguard Total Stock Market Index Fund, returned 14.26% for the quarter and –5.17% for the 12 months ended December 31. For the quarter, all 11 of the fund's industry sectors declined, with information technology, industrials, and financials detracting the most. For the 12 months, eight sectors declined, with only health care, information technology and utilities gaining ground.
- Money market yields continued to rise. Vanguard Federal Money Market Fund's average weighted maturity on December 3 was 52 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 interanational stocks was muted for the fourth quarter. Stocks in the Asia-Pacific region and Europe were in negative territory but narrowly outperformed U.S. stocks. Emerging markets were the strongest performers, but still declined for the quarter (–6.42%, as measured by the Spliced Emerging Markets Index) because of the rising U.S. dollar and trade-war concerns. For the 12 months ended December 31, the index returned –14.76%