Insights
into
key
market
performance
and
economic
trends
from
Dan
Kemp,
Morningstar’s
global
chief
research
and
investment
officer.
Last
week,
the
latest
inflation
data
and
the
Federal
Reserve’s
decision
to
leave
interest
rates
unchanged
dominated
conversation
among
market
participants.
Subsequent
commentary
fuelled
investor
optimism
and
increased
expectations
of
more
than
one
interest
rate
cut
this
year,
according
to
the
CME
FedWatch
tool.
You
can
read
about
how
Morningstar
Wealth
portfolio
managers are
incorporating
this
news
into
their
decisions and how
this
fits
into
a
broader
economic
context.
Equity
Market
Gains
Are
Very
Narrow
Although
the Morningstar
US
Market
Index rose
sharply
(1.44%)
over
the
week,
these
gains
were
unusually
concentrated,
with
only
the
technology,
communication
services,
consumer
cyclical,
and
real
estate
sectors
making
gains. Technology was
the
key
driver
of
the
overall
market
return,
rising
5.8%.
Nvidia (NVDA),
Apple (AAPL),
Microsoft (MSFT),
and
Broadcom (AVGO) accounted
for
approximately
80%
of
that
gain.
The
breadth
(or
narrowness)
of
contributors
to
market
movements
is
often
a
gauge
of
the
sustainability
of
the
current
price
trends,
with
narrow
market
leadership
seen
as
an
indication
of
a
future
reversal.
While
following
such
predictions
can
often
lead
to
disappointment,
diversification
in
these
trends
provides
opportunities
for
those
willing
to
undertake
research,
think
independently,
and
focus
on
the
long
term.
Musk’s
Big
Payday
One
big
surprise
last
week
was
Tesla (TSLA) shareholders
acquiescing
to
the
circa
$50
billion
compensation
package
for
Elon
Musk,
designed
to
address
the
perceived
risk
that
he
may
lose
interest
in
a
company
where
he
currently
has
an
investment
of
$100
billion.
The
belief
in
an
individual’s
ability
to
provide
sufficient
value
to
overcome
such
a
high
cost
is
reminiscent
of
the
investment
industry’s
“star
fund
manager”
culture
at
the
start
of
the
century.
This
climate
was
undone
by
passive
investment
firms
like
Vanguard,
which
demonstrated
the
importance
of
minimizing
costs.
Vanguard’s
support
of
Musk
in
this
latest
vote
is
a
fascinating
reminder
that
costs
migrate
with
changing
fashions,
and
investors
must
remain
vigilant.
The
Week
Ahead:
More
Fed
Talk
Comments
from
Fed
officials
will
likely
dominate
the
week
to
come.
While
such
comments
are
typically
watched
carefully
in
the
hope
of
understanding
future
Fed
policy,
investors’
current
consensus
will
not
be
easily
dislodged.
A
strong
consensus
can
push
prices
far
from
their
fair
value,
requiring
unusual
patience
from
those
with
a
long-term,
valuation-driven
approach.
However,
the
market
consensus
often
feels
strongest
when
a
change
is
underway.
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