Morningstar's chief multi-asset strategist Dominic Pappalardo and chief investment officer Philip Straehl
discuss current market opportunities.
As always, these prognostications must be taken with a grain of salt.
"In equity markets, Pappalardo and Straehl see value in international stocks, small caps,
global consumer discretionary stocks, and healthcare names.
In the fixed-income markets, they recommend a large overweight position in US Treasuries
and a slight overweight position in emerging markets."https://www.morningstar.com/markets/consumer-stocks-stand-out-among-opportunities-second-half-2025
Comments
The issue being discussed is: “To what extent are passive inflows into index funds affecting or distorting the markets? “ You won’t find an answer to where to invest now here. But very long term (over 10 years) the guests like small cap and value stocks. I enjoy the show for very late night listening. The casual relaxed approach won’t please everyone.
(There’s a 90 second commercial for Y Charts at the open that feels like an hour.)
The YTD returns for my small blend and large blend funds are 16.44% and 15.04% respectively.
I don't know if international equity funds will continue to outperform U.S. equity funds.
It's important to note that the U.S. outperformed international for a very long time (until recently)
and performance between these two asset classes tends to revert to the mean.
But together, they are just 17.74% of my total. As Leonard Cohen wrote in "Suzanne," I prefer to look "amid the garbage and the flowers." I don't like a crowded trade. My mutual fund managers are doing that already with United Health and the MAAG7 and the other trendy and beautiful, newest s**t. So, when I go shopping for a single stock, other points on the compass are more attractive to me. A lower than average multiple is important. I discovered Stock Rover, and it's extremely useful, in my opinion--- even the FREE version. More useful these days than Morningstar, if you're trying to dig and examine beyond the surface.
Where to invest now? My rules include a low P/E. And at least a 3% dividend, preferably with a payout ratio that doesn't serve to shoot yourself in the foot; it needs to be sustainable. I got out of BHB last year at a good spot, though I hung onto it for a bit too long. I hear tell that BHB is buying another smallish New England banking outfit. That will be a big expense, and so I'll stay away. CMTV out of Derby, Vermont at the Canadian border is still a fantasy for me. Right now, it's at the high end of its 52-week share price range. Even so, the div. yield is 4.8% and that's not shabby.
International? OK. Just wanna make sure that taxes are not preemptively stolen from the dividend, as was the case with Norsk Hydro. I sold it.
Total return over time is what we care about - not what mechanism led to that return. True, stocks that pay high dividends tend to hold up better in bad markets and so may be more desirable inside a portfolio in for providing stability. However, like other equity sectors dividend payers are subject to market cycles. They are not exempt from periods of overvaluation.
The foreign tax? That’s been discussed in the past. When you hold the foreign stock in your U.S. domiciled account you see the tax being taken from your account. You still pay the tax when that stock is held inside a fund. You simply tend not to notice it then. Really no difference.
You're correct. But I suppose I'm (still) in a rare situation, owing no 1040 federal tax, nor cap gains or tax on divs--- year after year. Collecting the divs gives me some freedom as to where to redeploy the "free money." Total return is indeed the goal. With my mutual funds in the T-IRA, those divs get auto-reinvested.
https://client.schwab.com/app/learn/#/story/3-retirement-income-mistakes-to-avoid
Vid:
https://client.schwab.com/app/learn/#/story/how-to-evaluate-dividend-stocks
Time will tell how I'll feel if/when we have a budget bill and a new debt ceiling. And by then there may be interesting new numbers on inflation. I doubt there will be anymore certainty on tariffs anytime soon.
https://www.cnbc.com/2025/06/27/china-us-agree-details-of-london-trade-framework-trade-agreement-beijing.html
I want to move from 56% equity to 60% equity. And 16% FI to 20% FI. My cash equivalents will then be approximately 20% of my total portfolio.
I guess it is time to start DCAing. I placed a buy order for an INTL index fund (large cap core) and another for PIMIX, both in my 401K. This should increase both allocations by 1%.
Worth doing some research.
these guys have very detailed and very thoughtful position papers, all free
https://www.gorozen.com/
Also run a mutual fund