ZBRA - Moat Stocks Hit Pause Following Strong Year

2024-02-09 22:22:00 ET

Summary

• After outperforming the S&P 500 Index by more than 6% in 2023, the Morningstar Wide Moat Focus Index returned some of that relative outperformance to begin the new year.
• The smaller cap SMID Moat Index also experienced a bit of turbulence from earnings related volatility this month.
• Volatility around earnings results was also a theme that impacted the Moat Index last year during the third quarter as well.

Moat stocks fell by 1.75% in January as earnings-related volatility impacted some of the index’s underlying holdings. However, as was the case after the Q3 earnings season, Morningstar analysts expect these names to recover strongly in the year ahead.

Equity markets started the year with a cautious tone following the blistering rally seen in the final quarter of 2023.Large caps regained their leadership position in January with the S&P 500 Index up slightly on the month, while small caps slid nearly 4%. Much of the negative price action of smaller companies came on the back of hawkish language during the January Fed meeting that pushed back expectations for interest rate cuts. However, strong performance by the familiar mega caps helped buoy the market but has also reignited concerns around narrow market leadership....

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