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Smart Investor: Undervalued Dividend Raisers, Will Tariffs Boost the CPI, and Two Top Pros on Bonds

We wrap up our coverage of the markets and the week.

A sign for Johnson & Johnson is seen outside the headquarters.
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This week’s highlights:

In a week when headlines seemed dominated by “investor optimism” about trade negotiations, the stock market’s rebound from its early April tariff plunge ran out of steam. Even the 2023-24 throwback rally among the Mag Seven took a breather.

Perhaps the theme of the week is again uncertainty--at least, it was at the Federal Reserve’s meeting. Fed Chair Jerome Powell made it clear that rate cuts are very much off the table, pending clarity on whether inflation or unemployment breaks higher first. As Morningstar’s Ivanna Hampton and Preston Caldwell discuss, this leaves the Fed in a real bind, potentially on hold until July.

As Sarah Hansen wrote this week in her Fed meeting preview, a big part of the issue facing officials and investors is that “soft” indicators, such as sentiment surveys on the economy, are looking awful, while the “hard” data hasn’t shown any worrisome tariff impacts. However, that could potentially change this coming week with the release of the April Consumer Price Index Report. Some economist are saying that the first hints of tariff-driven inflation could become visible.

Back on uncertainty, much remains unknown about where President Donald Trump’s trade wars will leave corporate profits. This week, we took a close look at how tariffs are playing out through Morningstar’s Uncertainty Ratings, which are a key variable in how we rate stocks. Thanks to tariffs, analysts have raised the Uncertainty Rating on dozens of names in just the past month. Which stocks have seen this change? Click here for the story.

What’s next? Dave Sekera, Morningstar’s chief US market strategist, offers his latest outlook. With the US market slightly undervalued, he says investors should have a slight bias toward value and core stocks. Find more of what Sekera suggests for investors here.

I checked in with two top bond fund managers from mutual fund giant Capital Group. They explain why it may pay to stay cautious on government bonds, while the high-yield market has been an opportunity to put money to work.

Lastly this week, we have our monthly recaps for April’s crazy stock market, including the best- and worst-performing stocks and the 10 best-performing dividend stocks. Speaking of which, we’ve also got our monthly screen for cheap dividend stocks that just raised their payouts. We found seven stocks, including one of the biggest pharma and medical device companies.

As always, be sure to visit our Markets page for our latest coverage and live stock market updates along with our full weekly calendar of key upcoming data and events.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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