Morningstar’s Annual Investing Conference: Surprising Day One Highlights

This year’s Morningstar Annual Investing Conference in Chicago touched on big themes and new ideas on its first day: the individualization of investing, inflation, changes in sustainable investing and the risk of recession due to Russia’s invasion of Ukraine. From “active customization” to “shoring friends” to SUVs and Formula 1 race cars, here are the big concepts for Monday’s opening.

Morningstar CEO Kunal Kapoor highlighted the opportunity for financial advisors to do what he calls “active personalization,” the new iteration of active investing. By using ratings to choose winning strategies, “tying the person to the portfolio with personalized risk tools,” and turning sustainability into “investability,” advisors can be more relevant to their clients. “Investing is a long-term game, after all, and so is your business,” Kapoor said. “Serving the next generation of investors means…showing clients the value of collaboration. This is your chance to be a navigator for a growing pool of interested investors.

Dan Kemp, Morningstar Chief Investment Officer for Europe, Middle East and Africa Investment Management Group, said that despite rising interest rates, inflation and geopolitical risks, there is no need to make hasty decisions. Investors need a solid portfolio that looks more like an SUV than a Formula 1 race car. “Diversification is not just about holding many different types of assets,” summarized Michael Claussen, partner media relations at the rating agency. “It’s about having options in your portfolio that behave differently from each other.”

David Giroux, portfolio manager in the U.S. equity division of T. Rowe Price, said that “recessions are rare, but the call for a recession is constant”. He also touched on a demographic issue that he says doesn’t get much attention. “The working-age population in the United States has slowed, and that will limit economic growth and put upward pressure on wages,” he said. Still, he added, economic productivity is expected to improve over the next five years.

Raghuram Rajan, former governor of the Reserve Bank of India and professor of finance at the University of Chicago Booth Schoolsaid inflation would likely continue and growth slow unless the war in Ukraine changed dramatically.

Claussen summarized Rajan’s remarks as follows:

  • Although a recession is unlikely this year, it is increasingly possible next year if the world’s central banks continue their current policies.
  • We are entering an era of de-globalization and strategic rivalry. We are going to start to see a new trend develop: friend-shoring, or investing in friends and trading with friends, which could harm global stability.