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By Jeremy Glaser and Christine Benz | 10-10-2014 06:00 AM

Friday Five: A Wild Week for Stocks; HP and Gap Make Changes

Our take on what's been roiling equity markets as well as how proposed changes at HP and Gap will affect the businesses.

Christine Benz: Hi, I'm Christine Benz for Welcome to the Friday Five. Joining me to discuss the market week that was is Morningstar markets editor Jeremy Glaser. Jeremy, thank you so much for being here.

Jeremy Glaser: You're welcome, Christine.

Benz: Jeremy, very volatile week in the equity markets. What, in your view, was driving all that volatility?

Glaser: I don't think there was any one determining factor--one kind of report or one catalyst--that really was sending the market up and down so wildly this week. You did kind of have to look at your calendar and make sure it wasn't 2011 again, given the kind of volatility we had. I think there are a few things weighing on the market right now.

The big one is just global growth. There are a lot of questions marks about what's happening with different types of growth--and we'll talk about that, I think, in a little bit--but that has certainly weighed. And then what impact it's going to have on global monetary policy. It's been a big driver of returns over the last couple of years, and what the growth picture looks like has a huge impact on that.

I think we're also in a time before earnings really get started and people start to get maybe a little bit worried about what those numbers are going to look like. If the growth is slowing down, what are [earnings] going to look like in the future? How do you discount that back into the market. So, when you're at these kinds of valuation levels, when things are fully or a little bit overvalued and you're priced for perfection, when you have some of these worries, you shouldn't be too surprised to see those changes.

I think we could see more volatility. We could potentially see a correction sometime in the future, given everything that's going on. I think for investors this is a great time to maybe take a step back, look at their asset allocation, make sure that they can really survive that kind of volatility, really survive a potential correction, be able to wait it out, if they need money in the short term that they should probably have that in more liquid securities--in cash--and really only have money in the stock market now that they really don't need for quite some time in case there is that kind of dislocation, they will have time to really make it up.

Benz: Do you think it's possible that some investors have perhaps gotten a little bit complacent about risk? We saw a lot of risk appetites increasing recently with a lot of interest in junk bonds and some of those other categories. Were investors maybe just a little bit spoiled?

Glaser: It could be possible. I think that's one explanation that we had--a placid environment where things just kept rising that maybe investors took off a little bit more risk than they really wanted. But I guess I would also warn that it's very difficult to make any kind of short-term market predictions about what's going to happen over the next three months or six months or what happened over the last three months or six months--if you're trying to determine precisely what drove that, I think it's basically impossible. Instead, you really have to focus out on what's going to happen over the next 10, 15, or 20 years when you're trying to make the decisions about where your money should go. I think those are the long-term decisions that people need to keep in mind instead of thinking more about, "How much risk can I afford to take on this week or this month?"

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