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Quarterly Recap: Market Performance Trends in 6 Charts

Morningstar Index lenses show market strength in third quarter of 2017

Dan Lefkovitz


Geopolitical risk. Legislative gridlock. Extreme weather. Markets have rolled over each of these roadblocks on their way to strong gains in the third quarter and throughout 2017.

The Global Picture

The Morningstar Global Market Barometer shows solid returns across the U.S., Europe, Asia, and emerging markets when measured in local currencies. During the quarter, the Morningstar Global Markets Index gained 5.3%.

The U.S. Investor View

And looking at global markets from the perspective of U.S. investors, the boost given to foreign stock returns by a weakening U.S. dollar becomes evident. For example, the Morningstar Europe Index gained 3% in euro terms but 6.9% in dollar terms.

U.S. Market Performance

Drilling down into U.S. market performance, equity gains appear far more evenly distributed in contrast to earlier in the year when growth stocks and large caps raced ahead of value and small. Still, the Morningstar US Growth Index is 13 percentage points ahead of the Morningstar US Value Index for the first three quarters of the year.

Sector Performance

Technology stocks enjoyed another strong quarter, but energy (boosted by rising commodity prices), financials, and industrials also outperformed the overall U.S. market thanks to a late-quarter rally. The Morningstar Energy Index gained more than 10 percentage points in September alone.

Examining Quality

Viewed through the lens of quality, defined by the Morningstar® Economic MoatTM Rating, stocks in the highest quality band underperformed the market, while Morningstar’s narrow and no moat indexes outperformed. The Morningstar Narrow Moat Index was boosted in the third quarter by holdings like Apple, AbbVie, and Chevron.

Sector and quality band leadership are interrelated. Energy, financials, and technology are not the most fertile ground for wide-moat stocks.

Bond Market Strength

Meanwhile, the bond market also featured broad-based strength. The Fed held steady, corporate fundamentals remained healthy, and global growth boosted emerging markets. The Morningstar Emerging Market Composite Bond Index gained 7.8% for the first three quarters of the year.

This research was originally published in Morningstar Direct’s research portal.

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