Quarterly Market Recap (July-Sept 2013)

The Markets

Equities confronted several threatening headwinds during Q3: Syria, potential Federal Reserve tapering, a looming government fiscal showdown, fear of contagion from the nation’s largest municipal bankruptcy, and three hours of Nasdaq going dark because of technical glitches. However, stocks managed to climb the proverbial wall of worry, especially after the Fed postponed any tightening and the military threat abated, though a looming fiscal showdown began to threaten those gains at quarter’s end. After an up-and-down summer, the Dow, S&P 500, and the small-cap Russell 2000 once again powered upward to fresh all-time record levels in mid-September, while the Nasdaq had the quarter’s strongest performance. Finally, as the eurozone emerged from the longest recession in its history and China showed signs of manufacturing growth, the Global Dow’s quarterly gains actually came close to rivaling those of the domestic market leaders and even nudged it ahead of the Dow year-to-date.

Bond markets suffered from Fed concerns. As the highly anticipated September meeting approached, the yield on the benchmark 10-year Treasury note neared 3%, a level not seen in more than two years. However, by quarter’s end it had given back roughly a third of a percent; since prices tend to rise when yields fall, that allowed bond prices to recover a bit.

Fed anticipation also pushed the dollar to three-year highs against a basket of six foreign currencies. However, that rally reversed course after the Fed’s announcement, costing the dollar roughly 4% for the quarter. Gold benefitted from dollar weakness, gaining roughly 6% to end near $1,330 an ounce, though it remains down roughly 20% for the year. Concern about the Middle East helped push oil prices above $100 a barrel for the first time since May 2012.

Equities data reflect price changes, not total return.

Source: Broadridge