Growth gains

Growth is good. That was the lesson of the second quarter for investors, when funds focused on high-growth stocks were some of the biggest winners. T. Rowe Price’s New Horizons is a fund that looks for small, rapidly growing companies, for example, and it turned investments in Shopify and Vail Resorts into a 7.9 percent return for the quarter through Thursday. That was more than double the 3.3 percent return for the S&P 500 over the same time. The trend was similar across the market, and the average large-cap growth stock fund returned 6.6 percent for the three months through Thursday. Value funds lagged, meanwhile, continuing a yearslong streak of underperformance. They were hurt this last quarter in part by bank stocks’ weak performance. Banks are often popular investments for value fund managers. Conventional wisdom says that banks make the most money when short-term interest rates are much lower than long-term rates. But, unfortunately for bank stocks, short-term rates have recently been catching up to long-term rates. That rise in rates also helped hold back returns for bond funds, many of which logged their second straight quarter of losses. Higher rates pull down the prices for bonds that are sitting in funds’ portfolios, because those bonds suddenly look less attractive than newly issued bonds with higher yields. The losses for bond funds were mostly modest though, at less than 1 percent. Emerging-market stock funds were another casualty of higher U.S. rates, which can divert investment dollars away from riskier investments. Many emerging-market stock funds snapped a strong, five-quarter winning streak with a steep loss for the April-through-June quarter.