Local-currency vs. U.S. dollar-denominated returns

Sources: © 2022 – Morningstar Direct, All Rights Reserved1, and Wells Fargo Investment Institute, as of September 30, 2022. For illustrative purposes only. YTD = year to date. The MSCI EAFE Index (USD/Local) is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of 21 developed markets, excluding the U.S. and Canada. The MSCI Emerging Markets Index (USD/Local) is a free float-adjusted market capitalization index that is designed to measure equity market performance of 23 emerging market countries. J.P. Morgan GBI Global ex-U.S. (Unhedged) in USD is an unmanaged index market representative of the total return performance in U.S. dollars on an unhedged basis of major non-U.S. bond markets. J.P. Morgan GBI Global ex-U.S (Hedged) is an unmanaged market index representative of the total return performance, on a hedged basis, of major non-U.S. bond markets. J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) is a U.S. dollar-denominated, investible, market cap-weighted index representing a broad universe of emerging market sovereign and quasi-sovereign debt. J.P. Morgan Emerging Markets Bond Index Global (Local Currency) (USD Unhedged) is a comprehensive global local emerging markets index, and consists of regularly traded, liquid fixed-rate, domestic currency government bonds.

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Key Takeaways

  • International assets, priced in U.S. dollars, have tended to underperform their local-currency-denominated counterparts when the U.S. dollar is up strongly.
  • So far, in 2022, equity and fixed-income indexes priced in their local currency or unhedged, have declined far less than U.S.-dollar-denominated indexes.