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Fund Spy

A Challenging Second Quarter for International-Stock Funds

Many funds post losses amid trade concerns and currency weakness.

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While U.S. equity funds, particularly growth-oriented and small-cap strategies, fared well in 2018’s second quarter, conditions weren’t as favorable for international-stock funds. Concerns about a trade war with China and the impact of tariffs loomed large for global companies, with many funds building on first-quarter losses to stay in the red in 2018’s first half. A strong U.S. dollar and rising interest rates hurt many developing markets as investors shed riskier assets. Meanwhile, compared with a sanguine outlook in the United States, projections for growth slowed abroad, setting up a quarter in which the MSCI ACWI ex USA Index lost 2.6% in U.S. dollar terms even as the S&P 500 gained 3.4%.

Geopolitical concerns hit some countries particularly hard. Brazil’s projections for economic growth dipped alongside inflation concerns, high unemployment, and a plunging currency. The Latin America Morningstar Category posted the steepest loss for the quarter at 22.4%. In Turkey, questions about monetary policy, inflation, and the country’s economic position against the backdrop of a presidential election led its currency to slide. India, which imports much of its energy resources, was hit by rising oil prices.

Katie Rushkewicz Reichart does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.