During the quarter, equity markets continued to rally, and the S&P 500 Index reached an all-time high in September of 1,725. This is the third quarter in a row in which the S&P 500 has set a record. Nonetheless, interest-rate-sensitive asset classes experienced significant price volatility as investors digested contradictory comments from the Federal Reserve Board. After suggesting in late May that monetary stimulus programs might soon be reduced, the Federal Reserve Board instead decided at its September meeting to continue these programs, given persistent weakness in several economic indicators.
This surprise announcement stabilized bond prices and higher-dividend stocks, many of which had suffered price declines earlier in the quarter. Sometime in the future, the Fed will likely taper bond purchases, perhaps as early as the first quarter of 2014. For now, the Federal Reserve is once again on hold, and the environment remains reasonably favorable for many investments.
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