Second Quarter in U.S. Stock Funds: Will Tariffs Derail This Market?

U.S. stocks showed some resilience in the second quarter, even as tariffs moved from rhetoric to reality.

The United States, China, the European Union, and others began erecting trade barriers during the quarter, causing investors to question the prospects for many multinational large-cap companies. Even so, the S&P 500 rose a modest 3.4% through June 28, 2018, led by growth stocks such as

Given the international trade disputes, investors looked to small-cap stocks, which typically do the bulk of their business in the still-strong stateside economy. The Russell 2000 Index jumped 7.9%, enjoying a relatively steady rise since early May even as trade tensions mounted. For the first time since the fourth quarter of 2016, value equities led the small-cap rally. Rising oil prices pushed energy stocks higher, and investors gobbled up U.S.-focused consumer defensives such as

Winners

While small-cap funds posted some of the second quarter's best absolute returns in the Morningstar 500 (a list of funds in the

Morningstar FundInvestor

newsletter that meet or clear some fundamental hurdles),

Losers

Trade tensions, an appreciating U.S. dollar, and another interest-rate hike by the U.S. Federal Reserve were a triple whammy for funds invested in emerging markets. The pain was particularly acute at

For all category returns through the previous day, visit the Fund Category Performance page.

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