INDEX INSIGHTS
Pockets of Opportunity
Selectivity will help investors navigate a pricey U.S. equity market in 2022
After another year of strong returns for U.S. equities in 2021, Morningstar Indexes believes a selective investment approach makes sense in the face of elevated valuations.
Dan Lefkovitz – Morningstar Indexes Strategist:
“U.S. equities have resumed their climb in 2021 as evidenced by a 24% rise for the Morningstar US Market Index through December 22. And on the back of 21% and 31.2% returns for the Index in 2020 and 2019, respectively, investors should be cautious and concerned about valuations as we go into the new year. Opportunities do exist, however, for those who are selective and look for competitively positioned companies trading at relatively attractive valuations.”
Lefkovitz sees pockets of opportunity today across a range of U.S. sectors as highlighted by the Morningstar® Wide Moat Focus Index, which provides exposure to companies with Morningstar® Economic Moat™ Ratings of wide, or durable competitive advantage, that are trading at relatively attractive valuations as determined by independent research conducted by Morningstar Equity Research.
Among the constituents of the Index, Lefkovitz points out cloud computing provider Blackbaud (BLKB), Healthcare stalwart Merck (MRK), Financial Services player Wells Fargo (WFC) and Energy provider Cheniere Energy Inc. (LNG) as examples of companies with a durable competitive advantage trading at attractive valuations.
To speak with Dan Lefkovitz, contact Tim Benedict at (203) 339-1912 or tim.benedict@morningstar.com.
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