Morningstar Q3 2024 U.S. Market Outlook: Shifting from Thematic to Idiosyncratic

Over the past one and a half years, 56% of the market’s return can be attributed to just ten stocks–and no theme has been more dominant than artificial intelligence. Of these ten stocks, seven were rated either 4- or 5-stars at the beginning of 2023. However, at this point, only one remains 4-star rated and four are now rated 2-stars. Generally, the obvious beneficiaries from AI are largely fully valued to overvalued. Looking forward, we expect excess returns will come not from investing in themes, but from idiosyncratic situations among those stocks that have underperformed and are unloved—and most importantly—undervalued. Learn where we see undervalued opportunities within a more than fully-valued market and how we expect the U.S. economy will play out over the course of this year. We will: • Break down our valuations and identify undervalued opportunities across categories, sectors, and stocks. • Highlight investable contrarian plays. • Provide our forecasts for real U.S. GDP, inflation, and interest rates. In our market outlook, we utilize a bottom-up perspective to determine market valuation. By leveraging off of the 1,500 companies covered by Morningstar's equity analysts, we identify which areas are undervalued versus which are overvalued. From growth stocks to value stocks and from small-cap to large-cap, we will identify where we see value today. Following the presentation, we take as many questions from the audience as time allows. Presented by: • Dave Sekera, CFA, Chief U.S. Market Strategist, Morningstar • Preston Caldwell, Chief U.S. Economist, Morningstar