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Quarter-End Insights

Our Take on the Second Quarter

All eyes were on central banks as volatility returned to both the stock and bond markets.

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Volatility returned this quarter in both stocks and bonds as fears about central-bank actions across the globe made investors increasingly skittish. Despite some big swings in the market, the broad-based Morningstar US Market Index rose 3.2% during the last 13 weeks.

The Federal Reserve's next move was under intense scrutiny throughout the quarter. In May, testimony from chairman Ben Bernanke and minutes from an earlier Federal Open Market Committee meeting raised fears that the central bank was on the brink of slowing down its purchases of mortgage-backed securities. Worries about this so-called tapering intensified in June after the bank's policy statement revealed the Fed raised its projections of economic growth and said that it could begin taking its foot off the accelerator as early as the end of this year. The focus on the Fed's potential tightening sent bond markets into a tailspin. The yield on the 10-year Treasury moved from 1.61% at the beginning of May all the way to 2.60% in June, before pulling back slightly to end the quarter around 2.50%.

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.