Morningstar's Dave Sekera believes that the economy will begin to recover by the fourth quarter of 2023.This story is available exclusively to Insider subscribers.Near-term headwinds will slow economic growth and heighten market volatility, said Dave Sekera.In a recent note, Morningstar shared its top 33 undervalued stocks to buy for the second quarter.
While the near term may look difficult for investors, Sekera believes that these headwinds will force the Federal Reserve to"At this point, it appears that we are either at, or near, the end of the current monetary tightening cycle," he explained."Looking forward, we expect that a weak economy combined with waning inflation will provide the Federal Reserve with the room it will need to reverse course and begin to ease monetary policy at the end of this year.
for investors. Sekara thinks stocks currently look historically undervalued, with the market trading at or below its current discount only 10% of the time since the end of 2010. Valuations-wise, small-cap firms remain the cheapest, while mid-cap and large-cap stocks respectively remain just below and above market average.
Consumer defensive names remain fairly valued, although according to equity analyst Erin Lash, opportunities remain in the consumer packaged goods and alcoholic beverages industries.