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Morningstar Market Commentary: Fourth Quarter 2008

The credit crisis bled over into nearly every sector.

Sanjay Arya, 01/13/2009

Financial markets went from bad to worse throughout much of 2008. Market anxiety reached uncharted territory as the credit crisis bled over into nearly every sector. In fact, direct government intervention was extended beyond the financial-services sector to several automotive firms.

On top of falling in each of the past three quarters, the Morningstar US Market Index dropped a staggering 22.54% for the quarter and fell 37.0% for the year. Bonds were generally positive in the quarter. Although commodities tend to exhibit low correlations with stocks and bonds, the long-only commodities index fell in line with equity, ending the year down 30.8% for the quarter.

In our special year-end review, we provide insight into the market's performance.

Click on this link to access the Morningstar Market Commentary.

A recap of some of the key observations:

* No place to hide for stocks. All of the style and cap indexes were down in the low to high 20% range in the fourth quarter.  

* Bonds diverge. U.S. Treasuries posted positive returns for the year and corporate bonds provided negative returns, which hasn't happened in over a quarter century. 

* The bear market for commodities continues. Commodity prices tumbled in the latter half of the year as a result of slackening global demand. The Morningstar Long-Only Commodity Index plummeted 33.77% for the year. The Morningstar Long/Short Commodity Index gained 11.31% for the year.

Sanjay Arya is director of Morningstar Indexes.

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