Morningstar's Take on 1Q22

The first quarter of 2022 was eventful. Russia invaded Ukraine. Growth stocks stumbled. Oil skyrocketed. Inflation continued to run hot. And the Federal Reserve raised interest rates.

Whether you're new to the market or a seasoned hand, an accumulator saving for retirement or someone who's already there, this quarter-end review is for you. The report brings together insights and perspective from our analysts and specialists about the markets, stocks, and funds.

Markets & The Economy

Market Outlook: After a First-Quarter Decline, Equities Trading at a Slight Discount Value and small-cap stocks are the most attractive.

Economic Outlook: Near-Term Challenges Shouldn't Knock Recovery Off-Course We expect inflation to return to the Fed's target levels by 2023.

Stocks

13 Charts on the Market's First Quarter Performance Investors face losses on stocks and bonds after a volatile quarter.

Funds

U.S. Value Funds Beat Growth in the First Quarter The difference between growth and value funds was stark.

The First Quarter's Top and Bottom Non-U.S. Equity Funds Russia's invasion of Ukraine and inflation fears spark growth selloff and commodity rally.

Best- and Worst-Performing U.S. Equity Funds Dividend funds and strategies with heavy energy stakes weathered the turmoil, while pandemic-high flyers took a beating.

How the Largest Bond Funds Fared in the First Quarter Amid a down quarter for bonds, there were few places for investors to hide among the bigger bond funds.

Interest Rates Soared in the First Quarter, Crushing Fixed-Income Returns Fixed-income and munis take the hit.

Equities

33 Undervalued Stocks for Second Quarter 2022 Here are our analysts' top stock ideas in each sector for the quarter.

If High Inflation Persists, Utilities Investors Should Prepare for the Worst The sector is 11% overvalued, and no companies trade below fair value estimates.

Market Decline Leaves Some Basic Materials Stocks Undervalued Speciality chemical producers a smart way to play the growth in electric vehicles and EG technologies.

Meta, Netflix Drag Down Communication Services Investors can find undervalued stocks in every subsegment.

Russia-Ukraine Crisis Triggers a Surge in Energy Shares Sector is pricey, but oil-services companies are trading at a discount.

War, Inflation Have Lighter Impact on Healthcare Stocks Threat of U.S. policy changes fading.

Pullback Reveals some Bargains in Tech Sector We expect strong growth for wide-mode software companies.

Higher Interest Rates Could Lift Financials Stocks Credit services and asset management are undervalued.

Selloff Leaves Industrial Products Trading at a Discount U.S. airlines are also worth considering.

In Real Estate, We Expect Years of Strong Growth for Hotels, Healthcare Segment No 5-star stocks in the sector, which is mostly fairly valued.

Travel, Leisure Companies Look Compelling in Consumer Cyclical More than half of the stocks in the sector trade at 4 or 5 stars.

Consumer Defensive Resilient, but Mostly Fairly Valued Strong brands are in the best position to weather any challenges.

Download the Quarter-End Data.