David Sekera, a top strategist at Morningstar, said there is one sector that “deserves a place in everyone’s portfolio” right now – energy. The firm’s U.S. market strategist told CNBC’s “Street Signs Asia” last week that the energy sector is currently trading at a 5% discount and “doing well, especially if we get into more of that later in 2025.” reflationary environment.” Sekera is not alone; Sander Morris Chairman George Burr and Morgan Stanley U.S. Value Fund portfolio manager Aaron Dunn are also bullish on the energy sector, given President-elect Trump’s desire to combat inflation by lowering energy costs. Sekara’s bets on energy-themed stocks include Exxon Mobil and Devon Energy. Morningstar has a four-star rating on Devon Energy and says the company trades at a 22% discount to fair value. The firm gives Exxon a three-star rating and says the company trades at a 12% discount. The investment research firm gives stocks a one- to five-star rating, with the highest rating indicating the stock is undervalued. After Trump won the US presidential election, the “perfectly priced” US stock market hit a new high, but has since taken a breather. “Right now, whether you want to call it a Trump shock or a Trump rally, based on our valuation, I think it’s raced,” said Sekera, who expected further gains in the near term to be “fairly limited.” “U.S. stocks are priced to perfection right now, so I think there’s limited upside until earnings start catching up with valuations, which will likely take at least a few quarters,” he added. Sekera said U.S. stocks are currently trading at Its fair value is about 6% higher. Against this backdrop, Morningstar maintains its “market weight” stance on U.S. equities, arguing that there are “enough tailwinds to outweigh the headwinds we are currently seeing,” Sekara explained. Among the headwinds he expects are inflation slowing below the Fed’s 2% target and further interest rate cuts in 2025. %, and 3.2% in 2026.
