The second quarter was not kind to the markets or to mutual funds, with the S&P 500 off by close to 3% on a total-return basis. The average balanced mutual fund fell by roughly 2.5%, according to Morningstar.
This could mean further rough patches and certainly more big swings in the near future, experts say.
“Even though stocks rebounded somewhat from their quarterly lows, the stock market was very much in the red for the quarter. What happens next will likely be driven by the same questions that dominated the landscape this quarter,” said analyst Jeremy Glaser with Morningstar in a preliminary Q2 report. “Investors should continue to be prepared for more volatility and surprises in the coming months.”
How did other categories of mutual funds do in Q2? U.S. diversified-equity funds fell 4.86% for the three months ending June 30, the fund-research firm said in preliminary data shared with AdvisorOne on Thursday. That’s about the same decline as the NASDAQ Composite, which was off about 4.75% on a total-return basis.
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“At the end of the first-quarter of this year, we remarked that the market was still willing to shrug off the storm clouds over Europe and the rocky recovery in the United States to post impressive gains. Three months later, the market’s patience seems to be running out,” Glaser explained.
Concerns with the future of the euro, China’s economic strength, U.S. jobs picture and other issues “turned sentiment, and stocks, lower in the second quarter,” he wrote. “The Morningstar U.S. Index dropped 5.7% during the last 13 weeks.” Still, the index is up 5% for the last 12 months and has returned an annualized 16% during the last three years.
Large-growth funds dropped 5.62% in the second quarter, while mid-cap growth products moved down 6% and small-growth 5.42%. Their value counterparts lost 3.60%, 4.81% and 4.83% respectively.
Year to date through June 30, though, U.S. diversified funds are up 7.66%, with growth funds outpacing value products overall. The S&P 500 has improved nearly 9.50% on a total-return basis for the January-June period.