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Quarter-End Insights

Our Take on the First Quarter

Volatility returned in the first quarter as Fed watching became a full-time job.

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Volatility returned in a big way in the first quarter of 2015 as the market focused on everything from central-bank actions to Greek elections, a strong dollar, and a steady beat of merger activity. Even with the bumps in the road, the broad-based Morningstar US Market Index squeaked out a 1.5% gain during the last 13 weeks and is now up an annualized 15% during the last five years.

Fed watching was a full-time job in the quarter. With the U.S. economy showing signs of improvement, the central bank started to send signals that it was ready to raise short-term interest rates and create a more normal monetary-policy environment after the extraordinary measures put in place during the financial crisis. The bank dropped references to it being "patient" in waiting to raise rates in its March statement, opening the door to an increase as early as its June meeting. But other language in the statement referring to moderating growth, a desire to see a rise in core inflation, some mixed economic data, and public comments from the Fed led some to believe that the increase may be put off until later in the year. And, of course, the Fed wasn't the only game in town. The European Central Bank, after dancing around the issue for years, finally launched a quantitative-easing program in an attempt to kick-start European growth.

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