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Quarter-End Insights

Our Take on the First Quarter

The stock market may have ended up near where it started, but the first quarter was far from placid.

A look at the Morningstar US Market Index's meager 0.6% return in the first quarter might make it seem like the market is simply taking a breather after 2013's breathless returns. But the first part of 2014 has been anything but tranquil. Concerns about emerging-markets growth and currencies, the Fed, stretched equity valuations, mixed economic data, and escalating tensions in Ukraine sent stocks on a bit of a wild ride.

Economic data released throughout the quarter were far from blockbuster. From the housing market to manufacturing to jobs, there were signs that the economic recovery may be slowing, putting a damper on hopes that were building at the end of last year that the recovery was truly on the verge of breaking out of its slow-growth rut. The real question was if the weak data coming in was merely an artifact of the abysmal weather or a sign of true underlying weakness. Morningstar director of economic analysis Bob Johnson thinks it is likely a combination of both with some sectors of the economy seeing a fundamental slowdown while others are only experiencing a temporary shift in demand. He still expects gross domestic product to grow between 2.0% and 2.5% for the full year and anticipates an improving housing market, less restrictive fiscal policies, and energy production to power the recovery for some time.