Markets Brief: AI Leaders Excel in Earnings Season So Far

Earnings
Season
Winners
and
Losers

As
we
approach
the
midway
point
in
the
US
quarterly
earnings
season,
we
have
started
to
receive
updates
from
the
large
technology
focused
companies
that
were
ominously
christened
the
‘Magnificent
Seven’
last
year.
Microsoft,
Alphabet,
Meta
and

Tesla,
and
have
already
reported
while

Apple
and
Amazon
are
expected
to
report
this
week
(Nvidia
reports
later
in
May).
Stronger-than-expected
results
encouraged
analysts
to
raise
their
expectations
for
future
growth
and
led
to
the

Morningstar
US
Technology
and
Communication
Services
index
rising
4.52%
over
the
week.
AI
continues
to
be
a
key
differentiator
among
this
group.
While
investors
appeared
to
welcome
further
investment
in
this
area
by

Microsoft
and

Alphabet
they
remain
concerned
about
higher
spending
by

Meta.
You
can
catch
up
on
the
latest
earnings
reports
from
Morningstar
equity
analysts
on
this
dedicated

page.

Will
China’s
Unloved
Stocks
Surprise
Investors?

Expectations
have
also
played
a
strong
role
in
markets
outside
the
US
with
concerns
about
economic
and
geopolitical
challenges
in
China
weighing
on
investors’
minds
over
the
last
few
years,
leading
to
a
42%
decline
(-47%
in
US
dollar
terms)
in
the

Morningstar
China
index
from
the
end
of
2020
to
the
start
of
2024.
Now
most
of
the
companies
that
dominate
that
index
now
appear
attractively
valued
to
Morningstar’s
equity
analysts
in
the
region.
Many
of
these
are
high
quality
businesses
which
Morningstar
analysts
expect
to
deliver
attractive
returns
for
investors
over
the
long
term
(evidenced
by
their

economic
moat
rating).
However,
this
market
appears
to
be
gaining
more
attention
given
the
11.19%
rise
in
prices
over
the
last
three
months,
reminding
us
of
the
benefits
of
searching
for
value
in
unloved
parts
of
the
capital
markets.
Morningstar’s
Investment
Management
team
outlined
the
attractions
of
the
Chinese
equity
market
(and
how
to
address
the
risks)
last
year
in
this

article
and
continue
to
see
opportunity,
evidenced
by
the
recent

Global
Convictions
document.

Expect
No
Surprises
from
the
Federal
Reserve

The
big
event
this
week
is
the
latest
interest
rate
decision
from
the
Federal
Reserve
on
Wednesday.
According
to
CME’s
FedWatch,
there
is
a
97.6%
probability
that
interest
rates
will
remain
unchanged.
Consequently,
any
other
outcome
would
provide
a
significant
surprise
that
could
lead
to
significant
volatility.
As
ever,
Fed
Chair
Jerome
Powell’s
comments
will
be
closely
scrutinised
by
investors
seeking
hints
of
the
future
path
of
interest
rates.
While
such
speculation
provides
work
for
financial
commentators,
it
should
be
of
limited
interest
to
investors
with
well-structured
portfolios
who
can
look
a
little
further
ahead.