Line chart tracks currency movements of the euro vs. the U.S. dollar and the MSCI EAFE Index relative to the S&P 500 Index.
Left Y-axis: Dollars per euro, from $0.60 to $1.80, right Y-axis: MSCI EAFE Index relative to S&P 500 Index (Indexed to 1 as of 1/1/1995); x-axis: 1995-2022.
- From 1995-2002, the euro declined 28.6% vs. the U.S. dollar, beginning above $1.25 and declining to near $0.89. During the same time period, the MSCI EAFE Index relative to the S&P 500 Index fell from 1.0 to about 0.4.
- From 2002-2008 the euro gained 64% vs. the U.S. dollar, beginning near $0.87 and rising to above $1.40. At the same time, the MSCI EAFE Index relative to the S&P 500 Index rose from about 0.4 to over 0.6.
- From 2008-2021, the euro was down vs. the U.S. dollar, beginning above $1.57 and declining to about $1.14 by the end of Q4. The MSCI EAFE Index relative to the S&P 500 Index fell from near 0.7 to about 0.2.
- The U.S. dollar strengthened in Q1 2022 to $1.11 vs. the euro, while the MSCI EAFE index relative to the S&P 500 declined to 0.21 at the end of the quarter.
Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 1995 to March 31, 2022. For illustrative purposes only. YTD = year to date. The S&P 500 Index is a market-capitalization-weighted index composed of 500 stocks generally considered representative of the U.S. stock market. The MSCI EAFE Index 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. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Index returns do not represent investment performance or the results of actual trading. Index returns reflect general market results, assume the reinvestment of dividends and other distributions, and do not reflect deduction for fees, expenses or taxes applicable to an actual investment. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. Investing in stocks involves risk and their returns and risk levels can vary depending on prevailing market and economic conditions. Foreign investing has additional risks including currency, transaction, volatility and political and regulatory uncertainty. Currency risk is the risk that foreign currencies will decline in value relative to that of the U.S. dollar. Exchange rate movements between the U.S. dollar and foreign currencies may cause the value of an investment to decline.
- International equities, priced in U.S. dollars, have tended to outperform U.S. equities when the euro has appreciated versus the dollar.
- We expect the dollar to remain elevated through the year supported by economic outperformance and wider rate differentials with the major developed economies.