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Fund Spy

International-Stock Funds Bounce Back in 2019

International equity markets rebounded off 2018’s lows to deliver robust returns.

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The United States-China trade conflict roiled global supply chains and equities, but a de-escalation in the latter half of the year spurred optimism. Dovish central banks drove global interest rates to low-to-negative levels, making equities look good relative to fixed income. As investors grew more sanguine about macroeconomic and geopolitical issues, the MSCI All Country World Index ex USA rose 21.5%. Developed equities outperformed their emerging counterparts, with the MSCI EAFE Index's 22.0% gain besting the MSCI Emerging Markets Index's 18.4%.

Yet such gains appear paltry relative to U.S markets. The broad Russell 3000 Index's 31.0% return easily outpaced all three international proxies. The MSCI ACWI ex USA has now lagged the Russell 3000 Index in two thirds of the past 40 quarters, contributing to an 8.5-percentage-point annualized lag over the past decade.

Tom Nations has a position in the following securities mentioned above: SHOP, WCMRX. Find out about Morningstar’s editorial policies.

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