DIMEMSIONAL FUND ADVISORS

From AI and tariffs to gold and market volatility, 2025 brought big questions for investors. Dimensional cut through the noise with research-driven insights—highlighting the power of diversification, forward-looking markets, and disciplined investing amid uncertainty.

US small caps have actually performed near their long-term average, while the S&P 500’s decade of outsized gains—driven by mega-cap tech—looks far less typical. The contrast suggests investors may be questioning small caps when large caps are the real outlier in the market.

While market swings and tariff headlines grab attention, sometimes the best response is to tune them out. Focusing on long-term trends rather than daily movements reveals a smoother, steadier climb, reminding investors that patience often outperforms reaction.

Stocks extended gains in Q3, with the S&P 500 and Nasdaq reaching record highs after the Fed’s first rate cut since 2024. Small caps outperformed, emerging markets led globally, and bonds advanced as yields eased, signaling broad momentum across markets.

NVIDIA’s earnings rose more than 60% over the past year, far outpacing the S&P 500, yet its shares slipped as high valuations left little room for upside. With nearly 8% of the index but about 4% of its earnings, the stock shows how markets price future expectations.

AI is reshaping business, and your portfolio can ride the wave. Major AI ETFs cover hundreds of companies, from tech leaders to unexpected names. Diversified exposure helps investors access AI opportunities without gambling on a single winner.

Markets rise not because predictions are right, but because people innovate, adapt, and persevere. David Booth argues that investing is a long-term bet on human ingenuity—and history shows it's a powerful one.

Markets were volatile in early 2025 amid tariff concerns and Fed uncertainty. Despite sharp swings, the S&P 500 rose slightly. Value outperformed growth, and global stocks led U.S. equities. Bonds gained modestly. Staying disciplined helped amid turbulence.

Despite recession fears driven by political and economic uncertainty, history shows markets often rebound. In 11 of 12 past U.S. recessions, $1 invested at the start saw gains over three years, averaging 43.2%—similar to long-term market performance.

US stocks ended the first quarter lower after reaching record highs, weighed down by concerns over AI competition, economic uncertainty, and the impact of new tariffs, while international markets outperformed and bonds showed modest gains.

After an election, many investors try to predict which sectors will thrive under the new administration’s policies. But history suggests that election-driven market bets rarely translate into long-term outperformance.

This presidential election feels uniquely challenging, but I remain confident in the long-term resilience of the stock market.

John “Mac” McQuown, a founding Director of Dimensional Fund Advisors in 1981, was a financial engineer, entrepreneur, and environmentalist with an insatiable curiosity and relentless drive that led him to start more than a dozen companies in his lifetime.

The stock market overcame a spike in volatility in the third quarter, reaching record levels again, as the Fed cut rates for the first time in four years.

The market rally that began in the second half of 2023 carried over to the first half of 2024, even as inflation fell slightly and the Fed kept rates steady.

You can thrive in a world of uncertainty and create a life that is uniquely your own.

This report features world capital market performance and a timeline of events for the past quarter.

What I love is witnessing an arena full of athletes trying their absolute hardest, working together to achieve a common goal.

I believe that the key to successful investing is to cultivate a long-term perspective, where you think in decades, not days.

Global diversification can increase the reliability of outperformance for strategies pursuing higher than market returns.

Rather than seeking additional exposure to these mega-cap stocks, investors should ensure their portfolios are broadly diversified to capture the returns of whatever companies ascend to the top in the future

Historical evidence suggests that interest rates have not been meaningful predictors of stock returns.

This report features world capital market performance and a timeline of events for the past quarter.

Investors should evaluate fully representative data rather than falling for the “shiny object” of recent performance.

Good investing, like good health, requires long-term discipline and commitment.

Stock returns are volatile, but nearly a century of bull and bear markets shows that the good times have outshined the bad.

As companies grow to become some of the largest firms trading on the US stock market, the returns that push them there can be impressive. But not long after joining the Top 10 largest by market cap, these stocks, on average, lagged the market.

Markets are forward-looking and the concerns that played into Fitch’s decision are not new information to most investors.

Many investors may think a market high is a signal stocks are overvalued or have reached a ceiling.