S&P: Domestic Stock Funds Fall Back Over First Six Months of 2005
An S&P news release said that domestic equity funds performed well during the second quarter of 2005, despite a tough climate of persistently high crude oil prices and rising short-term interest rates that took their toll on the equity markets. The average portfolio gained 2.4% during the second quarter, versus a 1.2% return for the Standard & Poor’s 500 Stock Index. But that quarterly gain was not enough to offset the effects of a dismal first quarter.
Meanwhile, returns of foreign stock funds eroded for US
investors as the dollar gained against foreign currencies
in the first half of the year, according to S&P. Even
though most global equity markets made modest gains in
local currencies year-to-date, many have declined in
dollar terms. For example, markets in the euro zone
gained about 7% in local currency, but saw around a 5%
drop in dollar terms.
The average international stock fund was ahead 0.57%
for the first half of 2005, while the average global
equity portfolio, which can also invest in
US stocks, edged down 0.19%. In the April to June
period, international stock funds rose 0.25%, while
global stock funds picked up 1.4%.
With the US economy appearing to be on solid
footing, with inflation in check, consumer confidence
picking up, and short-term interest rates still at
relative low levels, high-quality bonds delivered
modestly positive results through the first half of
2005, according to the S&P news release.
The average government securities fund edged down 0.07%.
In the second quarter, the average high-quality corporate
bond fund rose 2.4% and the average government bond fund
advanced 2.7%.
At the same time, Standard & Poor’s has found
that volatility in the US speculative-grade market
intensified in April and May, but appeared to be
retreating in June. There were also concerns about the
market’s ability to digest large batches of bonds
from giant automakers General Motors and Ford Motor that
were downgraded to junk status in May.