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International Equity Funds Bounced in Second Quarter

The comeback was uneven, however.

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Following a catastrophic start to the year, international equities rebounded sharply in the second quarter. The bellwether MSCI ACWI ex USA benchmark rose 16.1%, bringing its year-to-date return to a slightly more palatable negative 11.0%. Emerging markets, which suffered a greater decline during the first quarter, regained 18.1% versus a 15.3% increase for international developed markets. Regional performance followed a similar pattern as Latin American, Australian, and European markets rebounded more strongly following larger losses than Asian equities in March.

Value stocks didn’t see the same rebound, though. After falling 28.6% in the first quarter, the MSCI ACWI ex USA Value Index clawed back 12.8% in the second quarter, but its growth counterpart gained 19.1% after a loss of just 18.3%. Typically, one would expect the weaker-performing segment to make up more lost ground after a change in sentiment, but the coronavirus pandemic’s market impact had the opposite effect. Demand for growth-oriented technology, e-commerce, and healthcare stocks increased as investors piled into companies largely insulated from the effects of mandatory lockdowns. Winners included the likes of Canadian e-commerce platform company Shopify (SHOP), which more than doubled during the quarter.

Adam Sabban does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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