Market Insights and Investment Ideas

This week brings some interesting updates.

Before diving into the current market trends, there’s a bit of a new feature I want to mention. My colleague, Alexander Davis, has curated a newsletter titled Fusion of Public and Private. It combines insights and reports from both Morningstar and PitchBook, helping to clarify how public and private markets are evolving together. Definitely worth a look, I think.

On to the market: stocks in open market countries had a positive week. The Morningstar U.S. Market Index climbed 1.7%, reaching a record high, driven largely by solid performances in large-cap stocks. Interestingly, it wasn’t tech stocks this time; instead, basic materials and consumer cyclical sectors took the lead.

What’s behind this shift? Well, during this holiday period, there was quite a bit of news making waves. Geopolitical events and some announcements from the White House grabbed attention. Then, on Friday, the December jobs report came out, indicating that the labor market is showing some signs of weakness as we approach the end of 2025, although it’s not drastically weaker than it was in November. Economists have varied opinions on the report, so it’s worth checking those out.

This jobs report suggests that the Fed might not feel pressured to cut interest rates when they meet this month. But looking ahead to the rest of 2026, things could get a bit tricky. Central banks will have new leadership amidst persistent inflation and those underwhelming employment figures. There’s some intriguing commentary from Sarah Hansen about what this means for the Fed’s future.

We also had a conversation this week with David Polak from Capital Group. With over 40 years of experience, he shared his perspectives on the U.S. and global economy, discussing market risks and where the best investment opportunities might lie.

In another discussion, Susan Ziubinski talked to Dan Lefkowitz from Morningstar Index about share buybacks and their impact on dividends. It’s notable that 2025 marked the fifth consecutive year where companies allocated more resources to buybacks than to dividends. The question is, will this trend continue?

Looking ahead, the Morningstar analysts are maintaining a focus on 2026, examining various trends—from AI spending to power prices and AI-driven bond issuance. They’ve shared some insightful charts about trends likely to shape the upcoming year.

As 2025 wrapped up, there was a noticeable shift in the AI stock market. Investors have become more selective, moving away from the previous trend where everything seemed to rise together. We’ll be reviewing which AI stocks performed well and which didn’t during a pretty turbulent fourth quarter.

As always, feel free to check our Markets page for up-to-date stock market news, updates, and a comprehensive calendar of upcoming important data and events.