Our Take on the Fourth Quarter
Seemingly nothing could derail the bull market in 2013.
It would be a bit of an understatement to say 2013 was a good year for stock investors. Seemingly nothing, from the rapid rise in interest rates last spring as the Fed prepared to exit its quantitative easing programs to the government shutdown in the fall, could stop the bull market in 2013. The Morningstar US Market Index rose 33% in 2013 and more than 9% in the fourth quarter alone, while the S&P 500 and the Dow Jones Industrial Average hit all-time nominal highs.
The biggest story in the fourth quarter, and for 2013 for that matter, was the Fed's quantitative easing program. The market was fixated for months on the timing of the central bank's exit from its signature program. Starting in the first half of the year, chairman Ben Bernanke began discussing the possibility of tapering the purchases of securities in the face of improving economic data. The discussion in May led to a sharp and sudden increase in Treasury rates as the 10-year Treasury yield moved from 1.7% at the start of May to 2.2% in less than four weeks. The move in rates set off a communication campaign by the Fed to convince the market that they would not begin the taper until the economy was strong enough to support it and that short-term rates were going to remain extremely low for the foreseeable future.
Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.