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Morningstar's Take on the Third Quarter

Our analysis of the third quarter in stocks and funds.

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

Q3 Market Performance in 8 Charts U.S. stocks and bonds remain little changed from the second quarter.

A Quarter in the Red We look under the hood at the quarter's Morningstar Style Box trends and their (lack of) impact on investors.


Market Outlook: Investors Revive Pandemic Playbook Best opportunities remain in value and small cap.

Economic Outlook: Still Rising We think high inflation will be temporary.

33 Undervalued Stocks for the Fourth Quarter Here are our analysts' top ideas in each sector for the coming quarter.

How Will Fading Stay-At-Home Trends Affect Communication Services? In the long term, gaming companies could level up.

Healthcare Still Looks Pricey Drug and biotech industries pricing in the risk of policy changes in the U.S., but we don't think there will be a big regulatory impact.

Inflation a Big Obstacle for Utilities Most utilities have strong balance sheets and dividend growth potential, but we don't think that justifies trading at 20 times earnings.

Energy Retreats, Offering Some Opportunities We think oil consumption will continue to recover.

Electric Vehicles Sparks Growth for Basic Materials There are few undervalued stocks in the sector.

Hardware and Large-Cap Software the Best Values in Tech We're still optimistic about the cloud, 5G, and the 'Internet of Things.'

Financial Earnings Strong; Most Stocks Fairly or Overvalued Insurers should benefits from pricing increases.

Amid Supply Chain and Delta Variant Concerns, More Opportunities Emerge in Industrials Patient investors can capitalize on market turmoil.

Few Discounts in Real Estate Areas hurt most by the pandemic have rebounded.

Consumer Cyclical Underwhelms We expect consumers to begin spending more on experiences, such as travel.

Consumer Defensive Bargains Starting to Brew Heavy competition will persist, so strong brands with pricing power are best positioned. Q3 Top Stock Performers on Morningstar's Coverage List Tech, energy, and retail stocks popped ahead of a flat market. 5 Underperforming and Undervalued Stocks in Q3 Some of these stragglers just turned cheap.


U.S. Equities: Third-Quarter Wrap-Up Tech led the way, and value underperformed.

Fixed Income Funds: Third-Quarter Wrap-Up Bonds experienced mixed performance over the quarter.

International Funds: Third-Quarter Wrap-Up Events in the Chinese market took center stage. ESG Keeps Pace in Q3 Morningstar's sustainability indexes generally keep up with the broad market for the quarter, owing mainly to technology.

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