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Morningstar Market Commentary: Second Quarter 2008

It's been tough sledding so far this year.

Sanjay Arya, 07/15/2008

Financial markets continued to face headwinds in the second quarter of 2008, as the economy was hamstrung by the worst credit crisis in nearly a generation and skyrocketing energy prices. The Morningstar US Market Index registered a 1.5% drop for the quarter and was down nearly 11% for the year. Even the bond market did not escape the climate of uncertainty, with the Morningstar Core Bond Index dropping 1.3% for the quarter. Commodities represented the lone prosperous corner of the market, as the Morningstar Long-Only Commodity Index surged 21%.

In our quarter-end review, Research Analyst Arijit Dutta provides insight into the market's performance.

A recap of some of the key observations:
* Financials continued to wither while growth stocks flourished. The financial services sector continued to pay for its past excesses, losing 17% for the quarter. Among style categories, growth stocks put in a surprisingly strong showing with a gain of 5.3% for the quarter.
* Bonds no safe havens. Bonds gave up much of the gains made in the first quarter, as uncertainty about the future course of the economy trickled over. The Morningstar Core Bond Index dropped 1.3% in the second quarter.
* Commodities rise unabated. Strong showing by energy and agriculture commodities pushed the Morningstar Long-Only Commodity index up 21% for the quarter.

Sanjay Arya is director of Morningstar Indexes.


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