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Market update: third quarter 2013

Volatility returned, global growth improved, stocks gained a bit, and bonds sold off.

Outlook for the third quarter

Why Dirk Hofschire, senior vice president of Asset Allocation Research believes we may experience more volatility going forward.

Outlook for the third quarter

Global markets suffered a bout of extreme volatility, and bond yields rose on the perception that monetary conditions would tighten sooner than expected in the U.S. and China. The sell-off has improved the risk-return outlook for some asset categories, and equities in developed economies have been supported by better cyclical trends.

U.S. stocks added to their strong one-year gains during the quarter—evidence that investors' aversion to equities may be softening—but most other assets suffered negative returns. Rising interest rates and widening credit spreads led to losses across bond categories, while commodities and emerging markets suffered from China's slower outlook.

Get insight from Fidelity's Asset Allocation Research Team in the Q3 2013 Quarterly Market Update.

The complete report (PDF)

Complete Quarterly Market Update A 50-page report with charts and commentary on what's behind the international and U.S. markets.

Q3 key takeaways

Key takeaways for the third quarter 2013 Volatility returned, global growth improved, stocks gained a bit, and bonds sold-off.

Deep dives on key investing themes for Q3 2013

Case for stocks

Companies are strong, valuations suggest decent returns, and stocks tend to hold up in rising inflation.

Boost income

Diversify beyond high-quality bonds, and remain anchored to traditional safe assets.

Beyond bonds

Global stocks and other non-bond income sources may help boost income potential and lower risk.
The Asset Allocation Research Team (AART) conducts economic, fundamental, and quantitative research to develop dynamic asset allocation recommendations for the Global Asset Allocation Division of Fidelity Asset Management (FAM), the investment management arm of Fidelity Investments. Lisa Emsbo-Mattingly, director, Dirk Hofschire, senior vice president, and Craig Blackwell, analyst, contributed to this article.
The information presented above reflects the opinions of Dirk Hofschire, CFA, senior vice president, asset allocation research, and Lisa Emsbo-Mattingly, director of asset allocation research, as of July 9, 2013. These opinions do not necessarily represent the views of Fidelity or any other person in the Fidelity organization and are subject to change at any time based on market or other conditions. Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Past performance and dividend rates are historical and do not guarantee future results.
Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.)  Fixed income securities also carry inflation risk, liquidity risk, call risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

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