Insights
into
key
market
performance
and
economic
trends
from
Dan
Kemp,
Morningstar’s
global
chief
research
and
investment
officer.
In
a
week
when
political
violence
returned
to
the
US,
investors
faced
with
uncertainty
are
likely
to
seek
narratives
that
provide
a
guide
to
the
future
and
then
express
these
through
portfolio
changes.
This
can
lead
to
volatility
in
asset
prices
and
risk
investors
being
‘whip-sawed’
as
prices
first
overshoot
in
one
direction
and
then
another.
So
it
is
important
to
remember
the
old
investing
motto
‘don’t
just
do
something,
stand
there’.
The
most
important
thing
investors
can
do
is
stick
to
the
plan
and
avoid
reacting.
Expect
Volatility
This
Week
Occasionally
unusual
opportunities
can
emerge
in
these
situations
–
such
as
the
fall
in
Japanese
equities
in
the
wake
of
the
Brexit
vote
in
the
UK
–
which
can
increase
returns
for
those
investors
prepared
to
take
a
long-term,
valuation-driven
approach.
However,
most
investors
are
likely
to
be
best
served
by
doing
as
little
as
possible.
The
events
over
the
weekend
were
not
reflected
in
the
market
prices
at
the
end
of
the
trading
week
which
was
dominated
by
news
of
falling
inflation
and
stronger-than-expected
profit
growth
from
US
companies
reporting
at
the
start
of
the
earnings
season.
Small-Cap
Stocks
Recover
Within
the
US
markets,
the
recent
trend
of
large
company
leadership
was
reversed
with
the
Morningstar
US
Small
Cap
index
rising
4.62%
over
the
week
while
the
Morningstar
US
Mid
Cap
index
rose
3.05%
and
the
Morningstar
US
Large
Cap
index
rose
only
0.36%.
Despite
this
surge
in
prices
last
week,
Morningstar’s
equity
analysts
continue
to
see
significant
value
within
small
and
mid-size
companies.
To
find
out
more
about
this
team’s
views,
you
can
access
the
Q3
US
Stock
Market
outlook
here.
Rate
Cut
Hopes
Increase
Optimism
among
investors
was
supported
by
lower-than-expected
inflation
data
with
both
the
headline
and
core
Consumer
Price
Index
lower
than
expected.
Headline
prices
actually
fell
in
June
by
0.1%.
This
naturally
raised
expectations
of
a
cut
in
interest
rates
with
the
probability
of
at
least
two
interest
rate
cuts
by
the
end
of
the
year
rising
to
92.9%
from
76.4%
a
week
earlier,
according
to
CME
Fed
Watch.
US
Banks
Starts
Earnings
Season
Well
At
an
industry
level,
banks
were
especially
strong
with
the
Morningstar
US
Banks
index
rising
2.10%.
Formally
unpopular
US
Regional
banks
rose
even
faster
with
a
gain
of
7.42%
in
the
Morningstar
US
Regional
Banks
index.
Alongside
optimism
on
interest
rates,
this
also
reflects
a
strong
start
to
the
quarterly
US
earnings
season
for
the
banks
last
week.
You
can
catch
up
on
all
the
latest
earnings
reports
as
well
as
the
expectations
of
Morningstar’s
equity
analysts
here.
A
Noisy
Week
of
Data
and
Earnings
While
investors’
focus
is
likely
to
be
on
politics
this
week,
there
are
also
numerous
data
releases
that
will
provide
an
indication
of
the
health
of
the
US
economy
alongside
speeches
by
Jerome
Powell
and
other
Fed
officials.
At
a
company
level,
the
earnings
season
moves
up
a
gear
with
further
releases
from
financial
services
firms
and
the
earlier
reports
from
the
healthcare
sector.
Consequently,
it
is
likely
to
be
a
very
noisy
week
for
investors
and
a
reminder
of
the
importance
of
having
a
long
term
plan
and
strategy.
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