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Morningstar Market Commentary: Fourth Quarter 2005

Stocks continue their winning ways against difficult backdrop.

Sanjay Arya, 01/17/2006

Stocks continued their winning ways in 2005 against the difficult backdrop of rising interest rates, surging commodity prices, and catastrophic natural disasters. The Morningstar US Market Index posted a gain of 6.52% for the year, its third straight year of positive gains.

In our special year-end review, Morningstar fund analyst John Courmarianos provides insights into the market's performance.

To recap some of the key trends:

  • Value stocks continue to lead the pack. Value stocks beat their growth and core peers by a narrow margin.
  • Mid-caps outperformed large and small caps. Mid-cap stocks, which have led the market for much of last year, continued their winning steak.
  • Energy stocks were tough to beat. Fueled by rising oil prices, the energy sector posted a stellar 35% gain.
  • Active fund managers edged benchmarks. In five of the nine Morningstar style categories, mutual fund managers outperformed the indexes.

Also, here is an analysis of long-term performance trends using the Morningstar Market Barometer.

Sanjay Arya is director of Morningstar Indexes.

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