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Foreign Stock Market Performance: Better than Meets the Eye

Most investors have experienced losses in their foreign stock investments this year. But performance for foreign stock markets has not been as poor as the headline numbers suggest.

This years losses are primarily due to currency fluctuations. The U.S. Dollar has risen nearly 10% versus major foreign currencies, leading to depreciation in foreign stocks and bonds. Strip away the currency effect, however, and the performance of most foreign stock markets has been solid, up more than 7% (chart).

We expect the dollar will continue to strengthen, but that is not reason to abandon international equity diversification. While the initial effect of a stronger dollar is to weigh on the value of foreign assets, a secondary effect may be to boost the economies of these regions through increased exports. Additionally, foreign equity markets today trade at a meaningful valuation discount to the U.S. based on a number of metrics.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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