Insights on key market performance and economic trends from Dan Kemp, Morningstar’s Global Chief Research and Investment Officer.
The Morningstar U.S. Market Index rose 0.67%, with slower-growth sectors such as financials and energy outperforming companies that are typically expected to see faster profit growth.
Investors are keen on corporate bonds
The bond market saw little movement in yields, credit spreads, and future interest rate expectations. Treasury bonds continue to offer investors higher real yields (net of inflation) compared to yields that have been available recently. It is not surprising that investors continue to “flock to bond funds,” as Morningstar analysts Adam Saban and Ryan Jackson put it in their latest fund flows report.
Investors are also enthusiastic about corporate bonds, despite their expected high correlation with stock prices and unusually tight credit spreads. As with any fixed income investment, it’s important to be clear about why you’re making the investment. Confusion in this regard could lead to costly mistakes during periods of market volatility. Morningstar’s latest fund flow report can be found here.
Story shares plummet
Some investors have learned the hard way what happens when investing is divorced from financial analysis and used as a proxy for political or cultural views. GameStop Inc. GME (down 17%) and Trump Media & Technology Group Inc. DJT (down 25%) are examples of companies whose owners appear more focused on espousing views than maximizing long-term profits. To help investors avoid this situation, Morningstar Wealth’s Danny Noonan explains the challenges of mixing politics and investing here.
Beyond Nvidia
Market leader Nvidia NVDA fell 4% in a week after briefly becoming the most valuable company listed on the U.S. market. Following the phenomenal growth in adoption of generative AI over the past 18 months, the topic continues to dominate investors’ minds. While Nvidia has become the default way to invest in the space, Morningstar technology equity analysts William Kerwin and Brian Colello believe there are other companies that investors who want to access this industry should consider. Their report is available here.
Inflation in the spotlight
Inflation will be a hot topic again next week, as the Fed’s preferred gauge of price changes, the Personal Consumption Expenditures (PCE) index, is expected to show a further decline in inflation to an annualized 2.6% in May, both in headline and core form (Source: MarketWatch).
If the results are in line with this expectation of a continued gradual decline in inflation, investors are expected to feel more confident in the current consensus on the path to rate cuts.
Highlights from this week’s market and investment events
- Tuesday, June 25: June Consumer Confidence Survey
- Wednesday, June 26: New home sales in May
- Thursday, June 27: May durable goods orders, Nike NKE earnings
- Friday, June 28: Personal Income and Expenditures, PCE Price Index for May
See a complete weekly calendar of economic reports, consensus forecasts and company earnings.
Trading week ending June 21
- The Morningstar U.S. Market Index rose 0.65%.
- The best-performing sectors were consumer cyclicals, up 2.15%, and energy, up 1.80%.
- The worst performers were utilities, down 0.74%.
- The yield on the 10-year Treasury note rose to 4.25% from 4.20%.
- West Texas Intermediate crude oil rose 2.78% to $80.63.
- Of the 702 U.S.-listed companies surveyed by Morningstar, 477 (68%) rose, zero (unchanged) and 225 (32%) fell.
Which stocks are rising?
Chewy CHWY, Spirit AeroSystems Holdings SPR, PENN Entertainment PENN, Toast TOST, and Sirius XM Holdings SIRI.
Which stocks are falling?
AMC Networks AMCX, SolarEdge Technologies SEDG, ChargePoint Holdings CHPT, Enphase Energy ENPH, and CRISPR Therapeutics CRSP.
