Smart Investor: Top Stock Picks by Sector, Durable Dividend Payers, and What’s Behind the Bond Selloff

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In this week’s newsletter:

• Weekly Market Update: Stocks Down as Consumer Defensives Climb and Technology Tumbles
• Stock Sector Outlooks: Morningstar’s Top Q4 Picks Across the Market
• Where to Find Durable Dividends in Today’s Stock Market
• Do AI Labs Like Anthropic and OpenAI Have Economic Moats?
• The Bond Selloff Story Has Shifted. Here’s How That Changes the Stakes for Investors
• What’s Ahead for Stocks This Quarter—and Where to Invest
• Are TIPS ETFs the Best Way to Fight Inflation?
• What’s Happening in the Markets This Week

Investors had a bumpy ride this week. Hotter-than-expected inflation data on Wednesday, an ongoing chip selloff, and a rotation out of growth stocks and big tech fueled volatility in the stock market.

With the fourth quarter well underway, we’ve rounded up Morningstar equity research analysts’ top picks in every sector, from Alliant Energy LNT in the utilities category, to tech giants Alphabet GOOG/GOOGL and Broadcom AVGO, to consumer giant Kraft Heinz KHC.

As the AI trade continues to move the market—and as investors await Anthropic’s highly anticipated IPO—Morningstar analysts explore whether AI labs like Anthropic and OpenAI are building economic moats, or durable competitive advantages. In the first of a three-part series, they lay out the case for how they see these moats forming. Part two covers how Anthropic and OpenAI are building their moats. Part three explains the commodification threats to look out for.

Meanwhile, Morningstar Index’s Dan Lefkovitz dives deep into durable dividend payers—stocks with reasonable yields for companies well-positioned to maintain their payouts. He lays out how his team screens for these stocks in a market where yields across the board are low, and he shares 20 names that made the cut.

Over in fixed income, Morningstar chief US economist Preston Caldwell unpacks the ongoing selloff in the bond market. While the huge increase in borrowing to fund the AI buildout continues to push yields higher, Caldwell argues that concerns about ballooning government debt are now playing a bigger role. That could change the calculus for investors looking to jump into bonds to capture high yields. Caldwell also sat down with chief US market strategist Dave Sekera to discuss the outlook for the quarter.

Finally, Morningstar’s Dan Sotiroff, associate director of US passive strategies research, joined Ivanna Hampton to chat about Treasury Inflation-Protected Securities ETFs and how investors can use them to insulate their portfolios. You can watch the video here.

As always, visit our Markets page for our latest coverage, along with our full weekly calendar of key upcoming data and events.