Q4 2024 Schwab Intelligent Portfolios & Market Performance¹
How did Financial Markets do?
Global stocks were mixed in the fourth quarter, as a sharp selloff in December sent most categories of U.S. and international equities into negative territory. U.S. large cap bucked the trend, led higher by surging mega-cap names that have dominated the markets recently. U.S. small caps also rose modestly, led higher by financial stocks that investors hope will benefit from the third U.S. Fed rate cut of 2024, which took place in mid-December. International equities bore the brunt of the selloff, as internal political tension, tariff concerns, and a less rosy growth outlook weighed on investors.
A sharp spike in interest rates in December sent yields back toward their recent peak in April of 2024, pushing bond prices lower for the month and quarter. The modestly positive returns most bond types saw in 2024 capped the worst three-year period for bonds since the early 1980s, with many bond categories still not fully recovered from the historic selloff in 2022. Markets are concerned that weakening economic data will slow the pace of Fed rate cuts, causing inflation and interest rates to remain elevated for the foreseeable future. Higher rates also weighed on U.S. and international REITs in the quarter, reversing their furious rally in the prior three months.
Figure 1: Market performance (ranked by Q4 2024 total return)
| Asset class | Q4 2024 [Index Total Returns (%)] | 1-Year [Index Total Returns (%)] | 3-Year (annualized) [Index Total Returns (%)] |
|---|---|---|---|
| High-yield bonds | -0.023 | 7.655 | 2.574 |
| U.S. treasuries | -2.408 | 1.794 | -1.225 |
| Emerging markets bonds | -6.322 | -2.014 | -1.975 |
| Treasury Inflation-Protected Securities (TIPS) | -2.879 | 1.836 | -2.296 |
| Emerging markets stocks | -8.007 | 7.504 | -1.921 |
| Investment-grade corporate bonds | -3.040 | 2.029 | -2.203 |
| U.S. large cap stocks | 2.409 | 25.020 | 8.940 |
| International small cap stocks | -8.362 | 1.817 | -3.247 |
| Securitized bonds | -3.634 | 0.760 | -2.296 |
| Municipal bonds | -1.215 | 1.054 | -0.551 |
| International large cap stocks | -8.113 | 3.823 | 1.645 |
| U.S. small cap stocks | 0.334 | 11.538 | 1.240 |
| U.S. real estate investment trusts (REITs) | -6.264 | 8.440 | -2.279 |
Source
Source: Morningstar Direct, as of December 31, 2024.
Performance figures shown are total returns for each asset class during the designated period. Indexes used are: High-yield bonds, Bloomberg High Yield Very Liquid Index; U.S. Treasuries, Bloomberg U.S. Treasury 3-7 Year Bond Index; Emerging markets bonds, Bloomberg Emerging Markets Local Currency Government Bond Index; Gold and other precious metals, LBMA Gold Price PM; Treasury Inflation-Protected Securities, Bloomberg TIPS Index; Emerging markets stocks, MSCI Emerging Markets Index; Investment-grade corporate bonds, Bloomberg U.S. Credit Index; U.S. large cap stocks, S&P 500® Index; International developed market small cap stocks, MSCI EAFE Small Cap Index; Securitized Bonds, Bloomberg Securitized Index; Municipal bonds, Bloomberg Municipal Index; International developed market large cap stocks, MSCI EAFE Index; U.S. small cap stocks, Russell 2000® Index; U.S. real estate investment trusts, S&P United States REIT Index. Past performance does not guarantee future results. Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly.
How did Schwab Intelligent Portfolios do?
U.S. Focused models outpaced their global model counterparts in the fourth quarter, as U.S. large cap stocks were among the handful positive contributors. However, all models fell in value in the quarter as the majority of asset categories declined. For the calendar year 2024, all Intelligent Portfolio models delivered positive returns, with many exceeding their long-term averages.
Looking ahead
The Intelligent Portfolios are designed to help you achieve your objectives over the long term, irrespective of current events and day-to-day market movements. As is true every January, the coming year will bring its share of surprises - a new administration in Washington, continued tensions in the Middle East and Ukraine, and a Federal Reserve seeking to tame inflation while not derailing the economy. We have many online resources available designed to help you achieve your investment goals, and we’re always available by phone to answer any questions you may have.
Thank you for choosing Schwab Intelligent Portfolios again, and we look forward to continuing to serve you in the coming quarters and years ahead.