Morningstar's Take on the First Quarter

Morningstar's analysts have provided in-depth reviews and outlooks across equity sectors and fund categories for the first quarter of 2021.

Equities

Quarterly Market Outlook: North American Stocks Only a Little Overvalued The broad equity market is trading at a 3% premium to our fair value estimates.

Economic Outlook: U.S. Will Be Ready to Restart After Mass Vaccination Consumers are ready to spend.

Drugmakers and Managed-Care Firms Still Look Undervalued We don't expect any major changes to U.S. healthcare policy.

Utilities Shaking the Interest-Rate Stigma Strong fundamentals should allow the sector to continue producing positive returns even as interest rates climb.

Outperforming Basic Materials Leaves Few Bargains Opportunities in green hydrogen could benefit industrial gas companies.

Communication-Services Investors Warm Up to Smaller Media Stocks The giants still have an edge in this rapidly changing market, though.

Energy Climbs as Vaccine Rolls Out and Oil Prices Rise Even after the rally, the sector is undervalued, with the average stock trading at a 9% discount.

Tech Pullback Reveals Some Attractive Opportunities Software is the most attractive subsector.

Financials Stocks Should Handle Rising Interest Rates Better Than Other Sectors Most of the sector is fairly valued.

Transportation, Construction Optimism Lifts Industrials We expect the U.S. to increase spending on missiles, missile defense, and space militarization.

Vaccine Rollout a Big Lift for Hotels and Retail Real Estate Sector trades at a 4% premium to our fair value estimates.

Consumer Cyclical Is Poised for a Boom in 2021, but Bargains Are Scant We expect leisure travel to return in the coming quarters.

Consumer Defensive Trading at a 10% Premium We're keeping an eye on online grocery shopping. 10 Undervalued Wide-Moat Stocks Here's a peek at the cheapest constituents of the Morningstar Wide Moat Focus Index--as well as names that have been added and cut. Drugmakers and Managed-Care Firms Are Poised for Growth These areas remain undervalued even though valuations for the overall healthcare sector look a bit high. Vaccine Rollout Drives Energy's Rise But the sector's current tailwinds are likely unsustainable, so investors should prioritize high-quality businesses with stable balance sheets.

Funds

Another Quarter of Gains for the U.S. Equity Market Value drives U.S. equity market gains in the first quarter. The First Quarter in Bond Funds Rising interest rates unsettle bond markets. The First Quarter in International Stock Funds The recovery continues.

Download the quarter-end data.