the global view: Where Morningstar is seeing value 07.06.24

Dave Sekera, from Morningstar, shares the viewpoint that the market is quite extensively valued at present, but he points out certain investment prospects. Value stocks, carrying 7% less than fair value, are highlighted as ideal for an overweight investment strategy, counterbalanced by underweighting core stocks, which are trading ahead by 5%. Additionally, he highlights small-cap stocks, at an 18% discount and an appropriate field to perfect the investment balance.

Dave suggests investors take a contrarian stance, concentrating on stocks that have underperformed over the past year and a half, those encompassed in negative market sentiment and ones that are presently undervalued. Real estate sectors garner notable attention due to their contrarian nature, though he discourages investments in the office space. Furthermore, he emphasises undervalued cybersecurity stocks Fortinet (NASDAQ: FTNT) and Palo Alto (NASDAQ: PANW), along with AI and cloud sectors, overtly Nvidia (NASDAQ: NVDA).

Shifting the discussion to commodities, Dave disregards short-term oil prices but suggests energy sector as a worthwhile field to overweight. He prognosticates that it's trading at a 6% discount to our fair value despite the potential downside to the oil price forecast. Lastly, in light of economic development, the anticipation is for the Federal Reserve to cut the rates at the ensuing September assembly, and the principle is for the end of the 2024 funds rate to lay in the range of four and three-quarter to 5%.

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