Rate cut revives equities after volatile quarter.
Markets had an eventful and volatile third quarter that ended on a high note. Mounting subprime mortgage defaults led to a crisis in debt markets. The paralysis in debt markets forced many investors to sell stocks and other assets to raise cash or shed risk. In a strong move to prevent the spillover of financial turmoil, the U.S. Federal Reserve cut its key interest rate by half a percent. The rate cut instantly revived equities, allowing the Morningstar US Market Index to climb back in positive territory and finish the quarter with a 1.7% gain.
In our quarter-end review, Morningstar Indexes research analyst Arijit Dutta provides insight into the market's performance. A recap of some of the key observations: