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Quarter-End Insights

Our Take on the Fourth Quarter

Underlying corporate strength and an improving U.S. economic picture helped close the year on a high note, but obstacles remain for 2012.

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After a wild third quarter, investors couldn't be blamed for wanting a quieter end of the year. But the market did not want to cooperate. Although the tension was not quite as high as during last quarter's debt-ceiling debate and U.S. sovereign debt downgrade, events in Europe ensured that volatility and uncertainty remained the name of the game. Despite all of the noise in the market, the broad-market Morningstar U.S. Index gained 9.32% during the trailing 13 weeks and was up by 0.85% during the last 12 months.

Europe remained the clear driver of the market throughout the quarter. The sovereign debt crisis remained as intractable as ever as European leaders continued to squabble over bailout details. Stocks were jittery as a seemingly neverending flow of bad news emanated from the continent. From a planned (and then scuttled) Greek referendum on the bailout to soaring credit spreads on Italian debt to an undersubscribed German bond offering, there were plenty of reasons for investors to worry. Markets cheered a plan hatched toward the end of the year to create a stronger fiscal union and for the European Central Bank to provide extensive support to struggling European banks, and the moves bought some time to put more permanent solutions in place.

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Jeremy Glaser does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.