Investment Company Institute ® Investment Company Institute ® Perspective M U T U a L F U N D a S S E T S a N D F L O W S I N 2 0 0 0

In the first few months of the year, the NASDAQ composite equity index surged, and other equity indexes made gains as well. However, as the year progressed a number of factors began to weigh on the equity markets. Short-term interest rates rose in the first half of the year as the Federal Reserve continued a gradual tightening of monetary policy that began in 1999. In addition, the exchange value of the U.S. dollar appreciated to its highest level in many years. Those factors combined to slow the U.S. economy. In the second half of the year, many corporations filed unfavorable earnings reports, and the equity markets, both anticipating and responding to such reports, declined. For the year as a whole, the NASDAQ composite index posted its biggest decline ever, and other equity market indexes fell too, though more moderately.