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By Jeremy Glaser and Christine Benz | 08-04-2014 12:00 PM

What the Market Turbulence Means for Investors

Recent volatility should prompt investors to put their performance in perspective, check their exposures, and update their watchlists.

Jason Stipp: I'm Jason Stipp for Morningstar. Stocks suffered their biggest weekly loss in about two years last week after what has been a pretty tremendous rally in the market.

Here to talk about what the volatility means for investors is Morningstar markets editor Jeremy Glaser and our director of personal finance, Christine Benz.

Thanks for joining me.

Christine Benz: Great to be here.

Jeremy Glaser: You're welcome, Jason.

Stipp: Jeremy, anytime the market moves dramatically like this, investors want to know what's behind it, what caused it. In this case there seem to be almost as many answers as there are commentators.

Glaser: I think that's right, and it's hard to point any one item really giving a satisfactory answer as to why the markets sold off so much last week.

One that's talked about a lot is the future of Federal Reserve policy. I think it's understandable why this is on investors' minds. We've had unprecedented policy in terms of the Fed's quantitative easing programs, in terms of their new, very open communication policies compared to the past. And I think investors really just don't know what that's going to look like when that exit begins. We just don't have a good roadmap there.

But nothing that we saw over the last week radically changes what we should be expecting from the Fed. We heard from the rate decision that the taper is on track and should end reasonably soon--they should stop adding to their balance sheet--and that rates could rise sometime next year. These are both things that we had expected going into the week, and given the economic data that we got last week, with GDP for the first half of the year growing at about 2%, I don't think there is any reason to think [the Fed's plans are] going to change. So it's hard to see the Federal Reserve alone being responsible for such a big sell-off.

Stipp: What about some of the geopolitical issues that we've seen? Argentina was in the news last week, continued news out of Europe. Could that have been behind some of this market sell-off?

Glaser: I think that probably contributed as well. But it's hard to say that any one is the major factor behind what we saw last week.

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