3 Things Investors Can Expect in 2021's Second Half

Key takeaways from our second-quarter recap. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_smartinvestor&utm_content=30399&elqTrackId=028f97a0990e48759b35b70b797e0d17&elq=cd31ee7dbe2946e4927f808e8241fb79&elqaid=30399&elqat=1&elqCampaignId=13970) [Smart Investor] Smart Investor with [Susan Dziubinski, Director of Content]( [Susan Dziubinski] The first half of 2021 is officially in the books. The stock market notched double-digit gains, earnings growth was healthy, and inflation heated up. Thanks to rising vaccination rates here in the United States, we seem to be on track for a return to something resembling normalcy. In fact, I'm writing this week's edition of Smart Investor from my desk at Morningstar's Chicago office--my first time sitting in this chair since March 2020. What can we expect in the year's second half? I'm no crystal-ball gazer, but based on the commentary of Morningstar's analysts and strategists featured in our quarter-end coverage, here are a few of my thoughts for what the next six months may bring: + The [economic recovery]( will continue to move quickly because of soaring consumer demand. We're going to restaurants. We're flying. We're going to see movies. Our spending may shift away from goods and more toward services as the country continues to reopen, but we will nevertheless spend, spend, spend for the foreseeable future--and that will drive strong economic growth. + Inflation will continue to rise, at least in the short term, given robust consumer activity and supply-chain challenges. Morningstar [expects]( full-year inflation to clock in near 3% for 2021--the highest level since 2008. + The [oil markets will remain tight this year]( as global demand continues to outpace supply. Filling our tanks probably won't be getting cheaper anytime soon. What does this outlook mean for our investments? Morningstar director of personal finance [Christine Benz]( suggests that retirees make sure they have some [inflation protection]( in their portfolios. She also recommends that investors nearing retirement still maintain a high-quality, short- to intermediate-term [bond buffer]( despite the constrained returns that the asset class offers today. And although [wide-moat stocks]( have outperformed the market this year, Morningstar U.S. market strategist Dave Sekera thinks now is a good time to [trade up]( to high-quality companies. For more insights from Morningstar's specialists about the quarter in funds, stocks, and the market, check out our special report, "[Morningstar's Take on the Second Quarter]( ADVERTISEMENT [media]( [media] Quarter-End Insights [Morningstar's Take on the Second Quarter]( [Morningstar's Take on the Second Quarter]( Our analysis of the second quarter in stocks and funds. Morningstar.com [Market Outlook: Stocks Look Fairly Valued]( [Market Outlook: Stocks Look Fairly Valued]( It's a good time to trade up to wide-moat companies. Dave Sekera, CFA [Economic Outlook: Recovery Moving Quickly Thanks to Soaring Consumer Demand]( [Economic Outlook: Recovery Moving Quickly Thanks to Soaring Consumer Demand]( We've increased our GDP forecast. Preston Caldwell [The Second Quarter in Bond Funds]( [The Second Quarter in Bond Funds]( A respite from rising rates. Brian Moriarty [Q2 2021 Market Performance in 7 Charts]( [Q2 2021 Market Performance in 7 Charts]( Bond markets recover and stocks post broad gains. Katherine Lynch Popular This Week [An Executor's Guide to Inherited Retirement Benefits: RMDs]( Here's a rundown of an estate's options and obligations related to required minimum distributions. Natalie Choate [Digging Into Vanguard Dividend Growth]( The fund stands out for its focus on companies with a strong competitive advantage that can sustain and grow their dividends over time. Amy C. Arnott, CFA [Don't Be Dogmatic About Retirement-Portfolio Withdrawals]( In high- (or low-) tax years, retirees may have reason to flout the rules of thumb on withdrawal sequencing. Christine Benz [3 Investment Lessons From the First Half of 2021]( For the most part, the markets behaved in line with expectations. John Rekenthaler [6 Charts: Second-Quarter Fund Returns]( Latin America, commodities lead stock funds, long-term bond funds recover. Benjamin Slupecki Listen Now Get the latest investing insights and market updates with [Morningstar’s podcasts]( available on your iPhone, iPad, Android, PC, or smart speaker. Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2021 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602