WEEKLY BRIEF | No Roller Coaster Here

Hello, and welcome to the IVA Weekly Brief for Wednesday, September 23.

There are no changes recommended for any of our Portfolios.

Ask most investors, and they’ll tell you they are anxious about one thing or another—inflation, artificial intelligence (AI), the wars in Ukraine or Iran, action (or inaction) out of Washington, the upcoming midterm elections, the new chair of the Federal Reserve, interest rates. Pick your worry.

Given that backdrop, you'd expect the stock market to be riding a roller coaster this year. It hasn’t.

500 Index (VFIAX) is up 14.4% year to date and sits just 0.3% below its August record high. Its worst drawdown of the year—an 8.9% pullback in March—was fully recovered in 11 trading days. (I’m counting dividends in these stats.)

The S&P 500 index itself tells the same story. The index (excluding dividends) has posted a daily move (up or down) of 2% or more just four times this year—well below its average of 12 “2%+ days” a year since 1958, the first full calendar year after the index was created. Only 2017 and 2023 have shown fewer 2% days over the last decade.

In short: The market is delivering above-average returns with below-average volatility. Heck, we haven't even had a 10% correction this year.

Calm doesn't last forever. Low volatility tends to give way to turmoil, just as bull markets eventually give way to bear markets. Of course, every bear market has, in turn, given way to a new bull run.

Market cycles don't run on a schedule, and they don't always track the headlines. The answer isn't to sit out or try your hand at trading. It's to build a portfolio you can hold through the cycle, whether volatile or calm.

This calm won’t last, and neither will increased volatility when it arrives. But unlike a roller coaster, if you manage to hang on for the ride, you won’t just end up where you started but significantly further down the road to greater wealth.

Back at the Wheel

William Coleman is once again a Vanguard portfolio manager.

From 2013 to 2023, Coleman helped manage 21 of Vanguard’s index funds, plus the LifeStrategy and Target Retirement—around 40 funds in total. That year, he stepped away to lead the firm’s U.S. ETF Capital Markets effort.

Three and a half years later, he’s back in the PM seat. Last week, Vanguard added him as a co-manager on 18 index mutual funds and ETFs—20 if you count Real Estate Index Annuity and Real Estate Index II. All told, Coleman now lends a hand on $1.4 trillion in assets, trading everything from the world's largest stocks to (some of) the smallest.

While Vanguard’s indexing team is deep, the return of an experienced hand helps to fill the hole left by Gerard O’Reilly’s sudden passing this summer.

Welcome back, Coleman.

Our Portfolios

Our Portfolios are showing solid returns for the year through Tuesday. The Aggressive Portfolio is up 15.7%, the Aggressive ETF Portfolio is up 13.2%, the Growth Portfolio is up 14.2%, the Moderate Portfolio is up 13.0% and the Conservative Portfolio is up 7.7%.

This compares to a 14.4% gain for Total Stock Market Index (VTSAX), a 16.6% return for Total International Stock Index (VTIAX), and a 1.0% decline for Total Bond Market Index (VBTLX). Vanguard’s most aggressive multi-index fund, Target Retirement 2070 (VSNVX), is up 13.8% for the year, and its most conservative, LifeStrategy 20/80 (VASIX), is up 2.4%.

IVA Research

Yesterday, I closed out my taxable bond series by tackling foreign and global bond funds—and made the case for why global diversification is a good trade, but not a must-own.

Until my next IVA Weekly Brief, have a safe, sound and prosperous investment future.