U.S. equities continued to rise during the second quarter. Both large cap stocks (S&P 500) and small cap stocks (Russell 2000) finished the quarter in positive territory. The same can’t be said for International stocks though. There have been quite a few head winds for international equities, and that caused both developed and emerging markets stocks to perform poorly this quarter.
Heading in to the start of the year, the U.S. Dollar was in an established downtrend and that was really helping push international equity prices higher. That changed in late April, and the U.S. Dollar spent May and June in a strong rally that really had a negative impact on foreign equities. Both developed markets (EAFE) and emerging markets finished down for the quarter. We are also seeing a big rotation our of Latin America, which is one of the areas that was such a strong performer last year. While this is unfolding you should expect the character of our international holdings to change and be reallocated in areas that are holding up better. A declining U.S. Dollar isn’t a prerequisite for international stocks to do well, but when there is a sharp reversal like we saw this quarter it takes everyone time to adapt to the changes.
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