Tuesday, January 04, 2011

2011 Markets Forecast Outlook

Our Top Stock Picks, Fixed-Income Dos and Don'ts, and Market Forecasts

By Morningstar Investment Research

As 2010 hits the record books, the stock market turned in its second consecutive solid year of performance, with the Morningstar Market Index up over 15% for the year.

Meanwhile, on the economic front, our director of economic analysis Bob Johnson reports that after a rocky late spring and summer, the economy started regaining some steam in the third quarter as consumer spending accelerated to almost 3%, and early reports suggest it could accelerate to as much 4% in the fourth quarter, boding well for GDP going into the new year.

However, although stocks and the economy are gaining a foothold, the bond market emerged as a trouble spot late in the year, with fixed-income categories suffering as long-term rates moved higher. In his market outlook, Morningstar's Pat Dorsey takes a closer look at the performance divergence between bonds and stocks over the past few months and what it may mean for equity and fixed-income performance going forward.

In a related video report, our director of fixed-income research, Eric Jacobson, also weighs in on bonds' recent stumble, the outlook for rising rates, and how investors should think about their fixed-income portfolios going into 2011. And in a recent two-part report, Morningstar's Christine Benz offers some dos and don'ts for nervous bond investors.

In addition, the continued runup in stocks has left many areas of the market looking fully valued or even a little rich in some sectors. In our special year-end report, we review the winners and losers in the fourth quarter and 2010, uncover the remaining pockets of value today, and outline our sector-by-sector outlook for the market and the economy in 2011 and beyond.

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