Why This is a Must-Watch Fed Meeting

Undervalued, defensive health-care stocks, First Republic fighting for its life, and being bullish on bonds. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_smartinvestor&utm_content=43395&elqTrackId=0a8d7d4ce0234a00a12aa3f4d128094f&elq=670c6d86f2214b6282e5736dea11ebfe&elqaid=43395&elqat=1&elqCampaignId=20901) [Smart Investor] Smart Investor [Tom Lauricella, chief markets editor]( Connect with Tom on [LinkedIn]( [Tom Lauricella] In this newsletter: - [Why This Is a Must-Watch Fed Meeting]( - [Investors Should Care About the Banking Scare]( - [Why a Long-Term Bond Bull Is Still Bullish]( - [First Republic Bank Fighting For Its Life as ‘Rescue’ Reveals Bad News]( - [10 Undervalued Quality Healthcare Stocks]( If you think it’s hard as an investor to make sense of the banking crisis, put yourself in the shoes of a Federal Reserve official having to make a [decision]( this week on whether to raise interest rates. This coming week’s Fed meeting comes at a critical juncture. Inflation is still running hot as shown by the February Consumer Price Index report. As [we report here]( the latest CPI data showed that progress on reducing inflation has stalled out. But the banking crisis that took down Silicon Valley Bank and has First Republic Bank on the ropes threatens the broader economy. As [Sandy Ward writes]( banking crises are never just about the banks. This leaves the Fed in a really tough spot. At 6% inflation, it’s hard for the Fed to stop raising rates. But there are also real signs that loan growth is slowing, and that could put the brakes on the economy. Investors will need to watch the Fed meeting closely for signals on how it is threading this needle. We have [what you should be on the watch for]( here. While a credit crunch would be bad for borrowers and the economy more broadly, it could be the factor that brings down inflation and allows bond yields to fall. This week, we ran [an interview with Lacy Hunt]( a longtime bond market bull who has been predicting that the Fed’s interest-rate increases would soon begin to bite, especially when it comes to bank lending. All this has made for a really busy news week. Morningstar’s bank stock analysts have been in the thick of it. We have an assessment of [which bank stocks are most at risk]( should savers start pulling out deposits in mass. Also, Morningstar analyst Eric Compton takes a look at the “rescue” of First Republic Bank and finds a lot not to like from the stock perspective. It’s a bank that is “fighting for its life,” [he writes](. We’ve also been keeping close watch on the impact on fund investors. While relatively few funds owned much in the way of [Silicon Valley Bank]( or Signature Bank stock, it’s another story for First Republic Bank. As Katherine Lynch [reports]( a good number of stock funds held outsize stakes in First Republic stock and suffered big losses as a result. But as always, we keep hunting for opportunities for investors looking to put new money to work. It certainly feels like a good time to stay on the defensive, and for that, we’ve updated our screen of [undervalued healthcare stocks](. We’ve also got [eight stocks for sustainable-investing]( investors, including Glaxo, STMicro, and BorgWarner, and the [best iShares exchange-traded funds and BlackRock funds](. As always, to stay on top of our coverage of market and economic trends, check out the [Markets page]( on Morningstar.com. [Market Brief: Why This Is a Must-Watch Fed Meeting ]( [Market Brief: Why This Is a Must-Watch Fed Meeting]( The Fed may raise rates again, but its signals on the banking crisis and future rate hikes will be key for the markets. Sandy Ward, Jakir Hossain [Read More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] Morningstar Specialists [Which Funds Are Taking the Biggest Hit on Silicon Valley Bank and Other Bank Stocks?]( [Which Funds Are Taking the Biggest Hit on Silicon Valley Bank and Other Bank Stocks?]( Regional-bank ETFs post large declines, and even some diversified funds suffer from financials exposure. Katherine Lynch [Why Investors Should Care About the Banking Scare]( [Why Investors Should Care About the Banking Scare]( Banking crises are never just about the banks. Sandy Ward [U.S. Fund Flows: Momentum Stalls in February]( [U.S. Fund Flows: Momentum Stalls in February]( Bond-fund flows stayed positive, but U.S. equity funds remained weak. Adam Sabban [February CPI Report Showed Progress on Inflation Stalled, Fed Rate Hike Path Intact]( [February CPI Report Showed Progress on Inflation Stalled, Fed Rate Hike Path Intact]( Despite banking system worries, hot inflation means interest rates will head still higher. Lauren Solberg [Don’t Ignore the Banking Crisis]( [Don’t Ignore the Banking Crisis]( The health of the banking system is critical to the health of the economy. Tom Lauricella [Why a Long-Term Bond Bull Is Still Bullish]( [Why a Long-Term Bond Bull Is Still Bullish]( Investors are underestimating the impact of the Fed’s unprecedented tightening on the economy, inflation, and the risk of a credit-driven crisis. Tom Lauricella [Credit Suisse Liquidity Injection is a Positive, but Further Restructuring is Needed]( [Credit Suisse Liquidity Injection is a Positive, but Further Restructuring is Needed]( Restoring confidence and viability requires Credit Suisse closing its loss-making securities trading business. Johann Scholtz [Do Fund Companies Have a Duty to Pass Along Economies of Scale?]( [Do Fund Companies Have a Duty to Pass Along Economies of Scale?]( Yes in theory, no in practice. John Rekenthaler [Worried About a Recession Coming? You’re Not Alone.]( [Worried About a Recession Coming? You’re Not Alone.]( Three tips for coping with the recession threat. Danielle Labotka [Potential TikTok Ban in U.S. Would Benefit Google, Meta, and Snap]( [Potential TikTok Ban in U.S. Would Benefit Google, Meta, and Snap]( The uncertainty could push some content creators to focus more on other social network platforms. Ali Mogharabi [First Republic Bank Fighting For Its Life as ‘Rescue’ Reveals Bad News]( [First Republic Bank Fighting For Its Life as ‘Rescue’ Reveals Bad News]( Slashing fair value estimate on First Republic stock as disclosures remove doubts that a significant runoff of deposits has occurred. Eric Compton [The Best iShares ETFs and BlackRock Funds]( [The Best iShares ETFs and BlackRock Funds]( These top-rated funds make excellent long-term investments in 2023 and beyond. Susan Dziubinski Chart of the Week [Why Ultrashort Bond Funds Aren't Cash Substitutes]( [Why Ultrashort Bond Funds Aren't Cash Substitutes]( These funds are generally cautious but can still suffer losses. Amy Arnott [Read More]( Share: [facebook]( [twitter]( [linkedin]( Popular This Week [How Are My Funds Affected by the Banking Crisis?]( Troubled banks made a ripple—not a wave—for fund investors. Russel Kinnel [The Return of the Bond Market]( It’s been rough getting here, but the future looks brighter for bonds. Edward Fane, Ricky Williamson [Why the Banking Crisis Is a Big Deal]( Plus, utilities stocks that look promising and Pfizer’s stock prospects after its $43 billion deal to buy a cancer drug developer. Morningstar [10 Undervalued Quality Healthcare Stocks]( These wide-moat healthcare stocks are trading below our analysts’ fair value estimates in 2023. Margaret Guidici [Is Tesla Stock a Buy or Sell Right Now?]( We recently changed our fair value estimate—here’s what we think the stock is worth. Seth Goldstein 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](. © 2023 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602