Second Quarter in Non-U.S. Stock Funds: Uncertainty Abounds

International equity funds encountered a much different investment climate in the second quarter of 2019 than in the first. After calming in the first quarter, macroeconomic and geopolitical risks increased, raising tension and volatility in the markets. Still, the end results were middling at worst. The MSCI ACWI ex USA Index rose 3.0% in U.S. dollar terms for the quarter and was up 13.6% for the year. The MSCI EAFE Index of developed markets beat the MSCI Emerging Markets Index for the second consecutive quarter. Its 14.0% return thus far beat the MSCI Emerging Markets by 3.4 percentage points.

U.S. equities continued outperforming international equities. The MSCI ACWI ex USA Index has lagged the Russell 3000 Index in 65% of the past 40 quarters. Furthermore, the U.S. index’s margin of victory in its winning quarters was bigger than that of the non-U.S. index.