I’m still buzzing from last week’s Morningstar Investment Conference in Chicago—and it’s not from the “Core-Plus Double Espresso” I enjoyed in the exhibit hall. (Hat tip to Vanguard’s marketing team for the bond ETF-themed coffees at their sponsored stand.) From the first conference I attended 20 years ago, I’ve always found the annual event equal parts enlightening and energizing. A highlight this year was Retired General Stanley McChrystal. Among his lessons from the battlefield: “The 22-year-old intel analyst with a nose ring” is more important militarily than a bunch of “shaved apes.”
While virtual golf is fun and cocktails overlooking Lake Michigan and the Chicago skyline can’t be beat, my favorite part of the conference is hearing from professional investors. Here, I’ll share four takeaways, then contextualize them with memories from conferences past.
Insight 1: Lower Your Expectations for Stock Market Returns
BlackRock’s Rick Rieder, who manages $2.7 trillion (you read that right), was the first of many conference speakers to express unease with current price multiples on US stocks. Apollo’s Marc Rowan said: “By any historic precedent, public markets are expensive. In equities, it is easy to see.” Risks are plentiful. Beyond valuation, there’s deglobalization, higher interest rates, US debt, and geopolitics.
At the midpoint of 2025, investors in US stocks should be feeling grateful. The Morningstar US Market Index, a broad gauge of equities, has bounced back strongly after declining 19% between mid-February and early April. The market shook off tariff policy-induced jitters to advance 6% for the first half. The talk has turned to which company will hit a $4 trillion market capitalization first—Nvidia NVDA, Microsoft MSFT, or Apple AAPL.
The broad US equity market has produced an average annual gain of 14.6% over the past 15 years, and growth stocks have done even better. The historical yearly norm is more like 8%. According to Morningstar Equity Research, US stocks are currently trading a little above fair value in aggregate, and my colleagues have a good track record with valuation calls. Dan Davidowitz of Polen Capital offered wise words at the conference, cautioning investors not to extrapolate equity returns of the past 15 years into the future.
Insight 2: Diversify Your Portfolio
More than one speaker made the point that many investors these days are overallocated to stocks, especially US growth equities. Gone are the years of low yields when bonds were “return-free risks” as Tony DeSpirito of BlackRock reminded us. Thanks to interest rate hikes that started in 2022, bond yields are at a level we haven’t seen since before the 2008 financial crisis. My colleagues Philip Straehl and Dominic Pappalardo of Morningstar Investment Management currently see value in Treasury bonds, international stocks, small caps, and some unloved sectors of the US equity market. On that theme, Morningstar equity researchers Karen Andersen and Debbie Wang gave a great presentation on healthcare trends. In addition to GLP-1s, there are Alzheimer’s disease diagnostics, devices to treat chronic pain, and cancer therapies that are underappreciated by the market.
Global opportunities were a recurring theme at the conference. Fidelity manager Chris Lin put Taiwan Semiconductor TSM on par with the Magnificent Seven. A panel on Emerging Markets equities was filled with exciting talk of India, Latin America, and pockets of the Chinese market. “Non-US markets are priced to deliver better returns over the next 10 years, helped by valuation and currency,” predicted Morningstar’s Straehl.
A whole range of other assets came up during the conference as holding merit. Rick Rieder reeled off a list of diversifiers including gold, bitcoin, art, and real estate. Naturally, the cryptocurrency panelists were fans of crypto, and hedge-fund-like strategies were also discussed. For more on this topic, I recommend the Morningstar Diversification Landscape Report and How to Approach Liquid Alternatives in Your Portfolio in 2025.
Insight 3: Income Opportunities Abound—Just Beware the Risks
Legendary investor Ron Baron told us he doesn’t worry at all about macroeconomics, except for inflation. BlackRock’s Rieder said he expects the inflation rate to remain elevated and is looking for ways to “outrun” it. Stocks, of course, have historically provided strong real returns.
For income investors, high-quality bonds—both taxable and municipal—are currently providing real yield, but there are bigger payouts out there. One panel focused on exchange-traded funds holding collateralized loan obligations. Another, called Beyond Bonds, highlighted dividend-paying stocks, options-based strategies, convertibles, and other income-producing investments. Floating-rate bank loans were also mentioned. The Morningstar LSTA US Leveraged Loan Index carries a yield of 8.8%.
It’s key to remember, though, that chasing yield can be dangerous. Whether it’s stocks that turn into dividend traps, defaulted bonds, or liquidity drying up in a panic, income investing carries risk. Higher-yielding areas of fixed income also tend to provide less diversification benefit than core bonds. “There’s no such thing as a free lunch” was an oft-repeated conference comment.
Insight 4: Private Market Investing Is Trending
Unsurprisingly, Apollo’s Rowan made a compelling pitch for private market exposure. Gatekeepers from UBS and Bank of America seemed eager to offer private equity and credit strategies to their wealth management clients. The fact that the Morningstar PitchBook Global Unicorn Index contains 1,356 private companies worth more than $1 billion shows that significant capital formation is taking place off of public exchanges. Meanwhile, the private credit asset class is roughly the same size as high-yield bond and bank loan. So, there’s an argument that a portfolio holding both public and private assets better reflects today’s investable universe.
Skeptics worry about high fees, illiquidity, and overhyped performance and diversification benefits. For Dana Emery of Dodge & Cox, the rush into private assets is “ringing alarm bells.” A fixed-income investor, she pointed out that private credit has yet to be tested by a credit cycle. Morningstar’s Jack Shannon is another doubter. Broadening access is clearly a huge business opportunity for private market managers. I’ll note that Morningstar’s listed private equity index has smashed the broad stock market over the past 15 years, and the Blackstones, Apollos, and KKRs of the world are looking to keep up the outperformance.
Merits aside, what’s sure is that private assets ratchet up the degree of difficulty for investors. Morningstar CEO Kunal Kapoor said complexity is like a “Bat Signal” for our company. New Morningstar research on semiliquid investment vehicles is an attempt to help investors navigate the emerging private market space. At the conference, my colleague Bryan Armour moderated an interesting session focused on the liquidity mismatch born when non-marked-to-market assets go into the highly tradable ETF structure.
Haunted by the Ghosts of Conferences Past
When I reflect on 20 years of Morningstar Investment Conferences, standout memories include Jean-Marie Eveillard’s quip that “hedge funds aren’t an asset class; they’re a compensation scheme” and his exposition on the portfolio virtues of gold. Another call I should have heeded came from Robert Hagstrom, who told a skeptical mid-2000s audience that Amazon.com AMZN could grow by many multiples. Jeffrey Gundlach’s June 2007 presentation “Subprime Is a Total Unmitigated Disaster” also proved incredibly prescient.
Other calls didn’t age as well. Warnings of hyperinflation resulting from financial-crisis-inspired stimulus look Chicken Little in hindsight. Many value investors in recent years cried “bubble,” only for US tech stocks to reach previously unthinkable heights. Growth trends that didn’t quite live up to their conference hype include “smart beta,” liquid alternatives, blockchain, the metaverse, robo-advice, direct indexing, and environmental, social, and governance investing.
Will we credit the 2025 Morningstar Investment Conference for a wise decision to take some risk off the table? Or could investment returns for the coming years make us wish we were 100% exposed to US growth equities? Is private market investing an enduring theme or passing trend? Of one thing I’m confident: My notepad and I will be at Chicago’s Navy Pier on June 17-18, 2026, for the next Morningstar Investment Conference.
Morningstar, Inc., licenses indexes to financial institutions as the tracking indexes for investable products, such as exchange-traded funds, sponsored by the financial institution. The license fee for such use is paid by the sponsoring financial institution based mainly on the total assets of the investable product. A list of ETFs that track a Morningstar index is available via the Capabilities section at indexes.morningstar.com. A list of other investable products linked to a Morningstar index is available upon request. Morningstar, Inc., does not market, sell, or make any representations regarding the advisability of investing in any investable product that tracks a Morningstar index.
