From Morningstar: 2024-05-13 05:25:00

Insights into market performance and economic trends from Dan Kemp, Morningstar’s global chief research and investment officer, suggest investor focus on upcoming inflation data readings this week. Expectations are for a fall in annual core CPI from 3.8% to 3.6%, potentially challenging the notion of declining inflation rates and impacting asset prices.

Last week saw the Morningstar US Market index rise 1.85% as bond yields dropped amidst positive investor sentiment on future interest rates. The significance of sentiment on asset prices over short periods is evident, but separating sentiment changes from fundamental asset attractiveness remains a challenge, influencing investment decisions and market outcomes.

Almost half of the US equity returns in the first quarter came from positive sentiment, as per Morningstar research. While sentiment-driven prices may continue to rise, changes in investor outlook can erode this value. However, maintaining a long-term investment strategy is crucial, as sentiment-driven value can be rebuilt if prices align with fair value in the future.

The general election is expected to drive sentiment this year, but Morningstar Wealth highlights the dangers of letting political views influence investment decisions. Staying focused on long-term goals and avoiding politically-driven forecasts are essential strategies in navigating the investment landscape during an election year.



Read more at Morningstar: Markets Brief: All Eyes on US Inflation