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Quarter-End Insights

Our Take on the Third Quarter

Volatility returned in the third quarter thanks to geopolitical worries, but stocks ultimately proved resilient.

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Geopolitical wobbles introduced some volatility but couldn't derail the equity rally in the third quarter. The broad-based Morningstar US Market Index rose less than 1% over the last 13 weeks. The index is now up 8% so far in 2014 and has returned an annualized 16% over the last five years.

Concerns over conflicts across the globe were a major driver of U.S.-equity markets during the quarter. Tensions between the Ukraine and Russia were under particular focus as investors worried about the reverberations that an armed conflict would have on the European and global economy. The ongoing conflict in the Middle East, culminating with the U.S. and allies launching air strikes against targets in Iraq and Syria in September, was also eyed. The vote for Scottish independence, although ultimately unsuccessful, created some turbulence as the market fretted over both short-term issues and longer-term concerns about other European regions considering independence. South American economic issues also came to the forefront. Argentina entered selective default after U.S. courts ruled that the country couldn't treat creditors who had agreed to a bond swap differently from the creditors who had not.

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