From Morningstar: 2024-05-07 11:23:00

Insights from Dan Kemp, Morningstar’s global chief research and investment officer, show that large US company earnings have exceeded expectations, with year-on-year profit growth at 5.0%, surpassing the forecasted 3.4%. However, short-term results can mislead investors and distract from long-term returns.

Apple’s lackluster earnings report was counteracted by a $110 billion buyback program, resulting in a 5.98% stock price increase. This move highlights the challenge for large companies to reinvest profits for future growth, impacting valuations compared to firms with better reinvestment opportunities.

The Federal Reserve’s unchanged stance on interest rates was complimented by an unexpected rise in unemployment to 3.9% from 3.8%. Core services contribute to current inflation rates, but weakening employment growth may alleviate inflation pressure, possibly leading to further interest rate cuts.

Investors are closely monitoring Fed comments for confirmation of a slowing economy and lower interest rates. US equities are near fair value, prompting interest in undervalued investment opportunities. Diversification is key during calm markets to strengthen portfolios for any eventualities. Morningstar analysts continue to find value in overlooked areas of the market.



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