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Fund Spy

The First Quarter in International Stock Funds

The recovery continues.

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International equities continued to rise in 2021’s first quarter, though at a slower pace than in 2020’s final frame when optimism about coronavirus vaccine approvals fueled double-digit gains. As the global vaccination effort ramped up, The Morningstar Global Markets ex U.S. Index reached a record high in mid-February and finished the quarter up 3.8%. It lagged its domestic counterpart, the Morningstar U.S. Market Index, which gained 5.5%.

Energy and financials--the hardest-hit sectors in 2020--led the way. The Morningstar Global Energy Index and Morningstar Global Financial Services Index posted the largest gains of 18.8% and 11.1%, respectively, as energy prices recovered from lockdown lows and the yield curve steepened. Gains in other sectors were more modest, with consumer staples and healthcare edging into the red. The once high-flying tech sector showed signs of coming back down to earth, with the Morningstar Global Technology Index gaining just 0.9% versus 16.9% in the previous quarter. Surging U.S. Treasury yields hurt the growthy tech sector, and renewed concerns about delisting Chinese companies on American stock exchanges pushed many U.S.-traded Chinese stocks into bear-market territory. JD.com (JD), Tencent, and Baidu (BIDU) all finished the quarter more than 20% off their recent highs, while Alibaba (BABA) was down 17%.

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