Latest news with #DaveSekera
CNBC
02-07-2025
- Business
- CNBC
On the hunt for cheap stocks due for a second half bounce with Morningstar
Health care stocks could be the place to hide out for investors bracing for what many expect will be a volatile second half of the year. The industry is just starting to outperform, as traders rotate into a sector that is starting to look cheap after lagging this year. S & P 500 health care stocks are selling at 17 times forward earnings, far below their historical valuation. The entire S & P 500 sells for 23 times forward P/E. Exclude Eli Lilly , a high-flier thanks to its diabetes- and obesity treatments, and health care looks even more attractively valued. Lilly trades at 36 times forward earnings. "Healthcare looks very undervalued to us here, especially because healthcare is skewed to the upside, because [of] Eli Lilly," said Dave Sekera, chief U.S. market strategist for Morningstar. "Eli Lilly is overvalued. We think the market is over extrapolating the amount of profitability and growth in the GLP-1 drugs, which Eli Lilly, of course, is, you know, the the poster child for today." "If you were to take that out, the healthcare sector, as a sector, looks even more undervalued today," Sekera said, presenting an opportunity for investors. .GSPHC YTD mountain S & P 500 health care sector, year to date On Tuesday, the Dow Jones Industrial Average , which contains health care giants UnitedHealth Group , Johnson & Johnson , Amgen and Merck rallied, while the S & P 500 and Nasdaq Composite, which are weighted toward tech stocks that led the recent advance, retreated. Health care's relatively cheap valuations and above-average dividend yields give investors a "margin of safety" heading into the second half of the year, when the S & P 500 starts to look fairly valued at the same time as risks from tariffs and federal deficits continue, Sekera said. The strategist said he likes other beaten down parts of the market too, citing a preference for value stocks over growth issues and small caps over large caps. "Right now, I would actually prefer to see a greater margin of safety in the marketplace as a cushion for absorbing that amount of risk ," Sekera said. "With the market being at fair value, I think positioning is ever more important than usual."
Business Mayor
17-05-2025
- Business
- Business Mayor
3 Surprising Market Winners in 2025
Investors brave enough to peek at their account statements recently know that US stocks have had a rocky 2025. Even before tariff-related volatility, DeepSeek AI's launch clouded the major technology theme that powered the market in 2023 and 2024. According to my colleague Dave Sekera, AI stocks entered a bear market in March. The best-known investment bright spot in 2025 has thrived in response to uncertainty. You've probably heard about the price of gold shooting up, as panicky investors flee to a millennia-old store of value. Gold was also a shelter in the storm in 2022, when inflation triggered double-digit losses in stocks and bonds. But there have been equity gains to be had in 2025. Especially outside the US, some asset classes are thriving. When I look at year-to-date returns for Morningstar's extensive range of equity indexes, I notice a few surprising stars: European stocks, Latin America, and real estate investment trusts. What's the common thread that connects the three? All had been underperformers in prior years. Some Global Equity Asset Classes Have Thrived in 2025, Even as US Stocks Are Negative undefined European Stocks Have Been Made Great Again Morningstar's European stock index is riding high this year. 'The macroeconomic environment has been improving in Europe,' says Michael Field, Morningstar's chief Europe market strategist. The financial-services sector is a key beneficiary, with names like Banco Santander SAN, UniCredit UCG, and HSBC HSBA soaring. Then there's Germany's newfound interest in deficit spending and the continent's focus on military self-sufficiency, spurred by the Donald Trump administration. Spiking share prices for defense stocks like Rheinmetall RHM and BAE Systems BA. tell that story. US tariff announcements caused sharp selloffs in Europe, as they did across the globe, but the recovery has been V-shaped. A weakening US dollar has magnified European equity gains for unhedged US investors. It doesn't hurt that, unlike the US Federal Reserve, the European Central Bank and the Bank of England have actually been cutting interest rates. Coming into the year, my research and investment colleagues called Europe 'the most attractive developed-markets region globally.' The 'Magnificent Seven' era of US equity market exceptionalism left European stocks in the dust, plagued by slow-growth and an 'old economy' orientation (with some notable exceptions like semiconductor manufacturing enabler ASML ASML and weight-loss drugmaker Novo Nordisk NOVO B). Years of underperformance created a valuation opportunity. Europe is home to many high-quality global businesses, whose share prices were discounted because of their domicile. Regardless of valuation, European stocks are worthy of inclusion in a diversified portfolio. Latin America: Can the Revival Last? South of the US border, stocks are rallying. Morningstar's Latin American equities index is up more than 22% so far in 2025, thanks to Brazil, Mexico, and the smaller markets of Colombia and Chile. Here, too, a weakening dollar has boosted equity returns for unhedged US investors. Latin America is seen as a relative winner from Trump tariffs. Corporate earnings have also been strong. This marks quite a turnaround. The Morningstar Brazil Index and the Morningstar Mexico Index both suffered losses of more than 25% in US dollar terms in 2024. Brazil, for its part, faces serious fiscal challenges. In Mexico, sentiment was dented by election results on both sides of the border. Mexican President Claudia Sheinbaum and US President Donald Trump were both perceived as negatives for Mexican stocks. As with Europe, Latin American stocks looked like a real bargain coming into this year. In Morningstar's 2025 Outlook, my colleagues on Morningstar's research and investment team wrote that 'concerns about Mexico and Brazil appear exaggerated.' In fact, they identified Brazil as the highest potential global equity market for the coming 10 years. Latin American stocks are volatile but could hold more upside. Read More Shell profits to halve as oil prices slump REITs, Especially Those Outside the US, Outperform Real estate investment trusts are also up double digits this year—outside the US. The strength spans developed markets like Europe, Japan, and Australia, as well as emerging markets like Mexico, India, and South Africa. Property sectors in many geographies are vibrant, bolstered by low or falling interest rates. What about the US? The Morningstar US REIT Index is well behind the Morningstar Global Markets ex-US REIT Index in 2025, but it's in positive territory, ahead of the broad US equity market. US interest rates that appear to be staying higher for longer are seen as a negative for real estate. That said, REIT yields are attractive, and property is a 'real asset' that can act as an inflation hedge. Morningstar equity analysts continue to see upside potential in the sector. REITs span an array of types—from Kilroy Realty KRC in office space, to Healthpeak Properties DOC, to Americold Realty Trust COLD, which owns and operates cold storage warehouses. All are currently considered undervalued by Morningstar equity analysts. REITs, Especially Outside the US, Have Performed Well in 2025 undefined Diversification Assures Exposure to Unloved Asset Classes US mega-cap technology-oriented stocks did so well for so long that many investors thought they were the only game in town. Coming into 2025, it was hard to envision how the Magnificent Seven could ever be knocked off their perch. The rise of artificial intelligence, widely viewed as 'bigger than the internet,' seemed inexorable. No one saw DeepSeek AI coming, and few predicted the degree to which tariffs would disrupt. Gravity is a powerful force in investing, too. US stocks, especially on the growth side of the market, posted returns in 2023 and 2024 that far exceeded their historical levels. Their losses in 2025 can be seen as a reversion to the mean, or a return to long-term averages. Along these lines, I recommend a study by my colleague Jeff Ptak, who called buying into popular investment types a 'bad idea.' The surprising winners of 2025 show that investment performance is dynamic. Yesterday's stars can fall, and zeros can become heroes. Contrarian bets can be profitable, though they can also take time to pay off. Investors who diversify by geography, style, and market capitalization are also well placed to benefit from leadership change. The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
Yahoo
14-05-2025
- Business
- Yahoo
The market's mirage: Investors might be misreading the trade truce
Markets surged on this week's de-escalation in the U.S.-China trade war. But the so-called 'breakthrough' is riddled with caveats — and investors may be celebrating too soon. To hear many on Wall Street tell it, the global economy just dodged a bullet. Stocks soared. Treasuries rallied. Analysts at Wedbush called it a 'dream scenario.' But beneath the market's exuberance lies a messier reality: The trade war isn't close to over, and the 'deal' investors are cheering may be less a breakthrough than a well-branded pause. While markets have responded to the 90-day tariff pause and reports of a trade deal framework with optimism — the S&P 500 rose 3% Monday after the truce and added 0.7% Tuesday before a flat Wednesday — much of that optimism appears to be based on overly generous readings of the agreement's implications. With few concrete concessions from China, key sectors still exposed to high tariffs, and vague language around enforcement, the risks of a trade war relapse remain high. 'I think this rally is just too much too fast until we get more specificity as far as what the real trade terms are going to be, what they may have as far as impacts on the economy overall, as well as what individual companies will be affected and which ones aren't,' Dave Sekera, Morningstar's chief strategist, said in a note Monday. The U.S. has agreed to lower its tariff rate on Chinese imports from 145% to 30% (a figure that includes previously imposted fentanyl-related tariffs), while China has lowered its duties from 125% to 10% and offered vague commitments to resume negotiations on other key trade issues. There's no enforcement mechanism. And no resolution on key issues such as intellectual property protections or AI-related export bans. Perhaps most important, the 90-day pause leaves the door open for the sky-high tariffs to return if talks falter. Analysts at Jefferies described the move as more PR than policy, writing that it suggests 'the U.S. is more desperate than China to deliver the 'de-escalation' message to the market.' In other words: The optics may matter more than the outcomes. Investors may be celebrating a ceasefire, but the underlying structure of President Donald Trump's tariff regime hasn't changed. It's still built on unilateral authority, maximum optionality, and the idea that volatility is a feature, not a bug. As the Jefferies analysts put it, this is a classic case of ''raise price and then discount' — a tactic that can soothe markets in the short term, but leaves companies, allies, and adversaries alike uncertain about what's next. Not everyone around Wall Street is skeptical. Goldman Sachs (GS) reduced its estimated probability of a U.S. recession from 45% to 35%, while JPMorgan Chase(JPM) now places the likelihood of a recession at below 50%. Barclays (BCS) has dismissed recession risks entirely. Wedbush analysts called the trade announcement 'very bullish news for the tech trade,' saying in a note that supply chain concerns would now be 'significantly reduced.' They called it 'a huge win for the bulls and a best-case scenario.' But even as tech stocks rally, there is no sign that either country plans to unwind deeper restrictions on semiconductors, quantum computing, or AI components — the very technologies that define long-term strategic competition. Commerce Secretary Howard Lutnick has taken a hardline stance on national security-related tech, pledging a 'dramatic increase in enforcement and fines' for export control violations. He has also signaled that such controls will now be baked into future trade negotiations. Some investors, however, are taking the view that any deal — however flimsy — is still better than no deal. 'The market is going to take great comfort in the idea that there is a way forward and that all-time highs in the stock market are achievable before yearend,' Chris Zaccarelli, chief investment officer at Northlight Asset Management, wrote Monday. Gina Bolvin, president of Bolvin Wealth Management Group, echoed some of the optimism, writing in a Monday note that, if the deal sticks, 'this is a big WIN for Trump, for stocks, and for investors,' She added, 'This is why we tell our clients not to trade [on] headlines.' Other analysts were more blunt. 'This is a de-escalation, not a trade deal,' wrote Jeff Buchbinder, chief equity strategist for LPL Financial (LPLA). 'More work remains to be done. A pause isn't permanent.' Buchbinder pointed out that the underlying tariff structure remains largely intact. The 30% levy 'is still high enough to keep overall tariff rates in the low teens,' he wrote — suggesting that the market's excitement may be a bit overdone. 'The risk remains that tariffs go back up from current levels.' He said in an interview that his firm is 'kind of waiting and seeing' because a lot of big moves retrace. 'We think we're gonna get a dip,' he said. 'The message coming out of the White House has been clearly that they believe in tariffs and that these aren't just going to go away as part of a negotiation.' Sure, the lowered rates are attractive, but investors may be forgetting who's at the wheel. Trump has a well-documented habit of policy whiplash, especially when headlines or polling shift. The tariffs themselves have been a case study in volatility: imposed, threatened, dialed up, walked back, and now reframed as leverage in a deal that remains largely theoretical. Investors banking on a smooth path forward may be underestimating just how quickly the president's strategy can reverse. If talks with China stall again in July, a tariff re-escalation is hardly off the table. 'Trump announces tariffs, so markets fall. Trump walks back tariffs, markets rise,' University of Michigan economist Justin Wolfers said on CNN. 'If this is a way of writing a TV show, it's a pretty compelling script, and I'm watching it pretty closely. But if this is a way of managing the economy, it doesn't make any sense.' Markets may be trading on the headlines — but many businesses are living with the fallout. For small companies operating on razor-thin margins, a 30% tariff is still a major burden. Higher import costs, especially for key components from China, continue to strain budgets already under pressure. And small businesses largely don't have the scale or capital to hedge, stockpile inventory, or rapidly switch suppliers. At the macro level, the consequences are just as real. Tariffs, even at reduced levels, are inflationary by design. They put upward pressure on consumer prices and complicate the Fed's efforts to bring inflation down to its 2% target. Federal Reserve Vice Chair Philip Jefferson said Wednesday that the tariffs were likely to push inflation higher in the near term, raising the stakes for monetary policy decisions. U.S. companies also now face disadvantages versus foreign competitors that aren't subject to similar tariffs (namely in Europe and Southeast Asia) and the result is an uneven playing field. As American firms recalibrate, cut back on hiring, or pass costs on to consumers, the risk of an economic slowdown rises. Peter Dutton, a senior fellow in the Paul Tsai China Center at Yale Law School, said that this deal-making isn't going to end any time soon. 'I see this as just the beginning of a process of stabilizing economic components of the relationship,' he said, 'and it's likely to be a long and steady process.' So while the market may be sprinting ahead, the track is still being laid. For the latest news, Facebook, Twitter and Instagram. Sign in to access your portfolio
