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Quarter-End Insights

Morningstar's Take on the Fourth Quarter

A Fed rate hike, more mergers, and further pressure on oil prices dominated headlines in the final quarter of a volatile year.

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After falling in the third quarter, stocks rebounded at the end the year. In the last 13 weeks, the broad-based Morningstar US Market Index rose more than 6%. The index ended the year up around 0.7% and is now up an annualized 12.3% during the last five years.

But this market-level performance data obscures the big differentials in sector performance. For the full year, the energy and basic-materials sectors were a big drag, with energy underperforming in the quarter, too. The energy fall was obviously connected to the continued decline in oil and other commodity prices. The market is still worried that rising supply from the U.S. and signs that OPEC won't cut production are swamping demand in a slowing global economy. Morningstar's equity analysts think prices could fall even more in the near term but that, over the long term, low prices aren't sustainable and will rebound.

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