Domestic Stock Funds Chalk Up Strong Gains Showing Contrasts With Losses For Many International Funds

Mutual funds investing in U.S. stocks closed out the first quarter of 1995 with their best gains in more than two years, the research firm of Lipper Analytical Services reported Tuesday.

The strong showing of the domestic funds contrasted sharply with losses in most categories of international funds tracked by Lipper.

The firm’s average of 1,748 domestic stock funds jumped 7.16 percent in the January-March quarter, assuming reinvestment of dividends. Lipper’s average of 639 world equity funds posted a 3.11 percent loss over the same span.

“The split is extremely rare,” Lipper analysts said in a news release. “Over the last 35 years, domestic and international funds have gone in different directions during just one calendar year, 1992.

“One would suspect, if historical patterns resume, either domestic funds would cool off or international ones would heat up, or perhaps some combination of both.”

Lipper said the gain recorded by the domestic stock funds was the biggest since the fourth quarter of 1992.

Among seven categories within the overall stock group, the standout performer was index funds patterned after Standard & Poor’s 500-stock composite index, which were up 9.59 percent.

It is unusual for index funds, which are designed specifically to mirror the performance of some market standard, to outperform other categories so decisively.

Analysts say that has happened lately because many of the big blue chips that dominate the S&P 500 have been faring exceptionally well.

These companies typically are multinationals that have attracted heavy buying interest from investors looking for a way to participate in overseas economic growth without exposing themselves to the volatility of foreign stock markets.

That volatility was reflected in the first quarter by the 48 emerging markets funds tracked by Lipper, which averaged an 11.22 percent loss.

Weakness was especially concentrated in Latin American funds, which tumbled 30.38 percent as Mexico grappled with its financial crisis.

European funds managed a 2.37 percent gain.

Among domestic specialty stock funds, the health and biotechnology group was the best performer, climbing 10.26 percent. Health care stocks lately have rallied after a long spell of disfavor exacerbated by the debate over health care reform in the United States.

Michael Lipper, Lipper Analytical’s president, noted that his firm’s growth fund index has almost doubled since the fall of 1990, traversing that entire 4 1/2-year period without a correction, or interim decline, of 10 percent.

But while he said the age of the bull market caused him concern, Lipper also described the advance in the first quarter as impressive.

“We’re in a period of lower interest rates, increasing money supply and good corporate earnings,” he said.

“Perhaps most important, we’ve had a number of shocks to the system and still the market hasn’t gone down. The internal structure of the market appears to be stronger than a lot of people expected.”