Insights
into
key
market
performance
and
economic
trends
from
Dan
Kemp,
Morningstar’s
global
chief
research
and
investment
officer.
The
latest
PCE
measure
of
US
inflation
was
in
line
with
expectations
last
week
leaving
investors
unperturbed.
While
we
can’t
know
what
lies
ahead,
it
seems
likely
that
the
macroeconomic
environment
is
stabilizing
and
consequently
a
less
powerful
driver
of
investor
confidence
and
market
movements.
When
this
happens,
investors
tend
to
become
more
focused
on
individual
companies
and
their
idiosyncratic
characteristics.
Value
Stocks
Overtake
Growth
Following
a
sharp
difference
in
returns
last
week,
the
Morningstar
US
Value
index
is
now
ahead
of
the
Morningstar
US
Growth
index
over
the
year
to
date
(up
7.58%
and
6.59%
respectively).
Despite
this,
Morningstar
equity
analysts
continue
to
see
better
investment
opportunities
in
value
companies,
where
the
average
discount
to
fair
value
is
typically
larger
than
for
growth
stocks.
Why
Smaller
Companies
Become
Takeover
Targets
The
difference
between
value
and
growth
companies
is
especially
pronounced
among
mid-size
and
smaller
companies.
This
is
important
as
these
companies
are
often
targets
for
acquisition
by
their
larger
peers
and
private
capital,
a
process
that
can
lead
to
a
rapid
realization
of
this
value.
A
good
recent
example
was
provided
this
week
by
the
agreed
takeover
of
Marathon
Oil
by
ConocoPhillips.
To
take
a
deeper
look
at
smaller
company
investments,
check
out
this
recent
article
by
Morningstar
editor
Tori
Brovet.
Private
Markets
Need
New
Investors
US
private
capital
investors
are
continuing
to
engage
in
new
deals
while
exits
and
fund
raising
becomes
more
difficult.
This
reflects
the
remaining
unused
capital
from
earlier
funding
rounds
and
the
continuing
desire
of
companies
to
raise
capital
in
private
markets.
As
private
markets
continue
to
grow
and
managers
seek
new
sources
of
capital,
the
industry
is
increasingly
focused
on
investors
that
had
previously
been
excluded
from
this
market.
As
with
any
new
strategy,
it
is
important
to
understand
both
the
benefits
and
drawbacks
before
diving
in.
To
find
out
more
about
the
latest
developments
in
this
market,
check
out
PitchBook’s
latest
Deal
Roundup
here.
Summer
Can
Make
Us
Lazy
Investors
This
week
is
cluttered
with
economic
data
of
which
the
US
unemployment
(more
commonly
referred
to
as
Non-Farm
Payrolls)
report
on
Friday
is
likely
to
create
the
most
noise
in
markets.
Disappointing
economic
news
can
have
a
greater
impact
at
this
time
of
year.
This
is
a
situation
encapsulated
in
an
old
London
investing
motto,
“Sell
in
May
and
Go
Away”.
While
attempting
to
time
investing
in
this
way
was
long
ago
debunked
as
foolish,
markets
tend
to
be
less
liquid
in
the
summer
and
consequently
prices
can
be
more
volatile.
This
can
be
dangerous
for
investors
as
it
encourages
myopic
decision
making.
It
is
therefore
more
than
usually
important
to
resist
the
urge
to
respond
to
each
new
headline
and
instead
test
every
decision
by
whether
it
is
focused
on
long
term
gains.
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