This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

Our stock-bond asset-allocation model, which we call the Stock-Bond Barometer, is now indicating that bonds are the asset class offering the most value at the current market juncture. But not by much. Our model takes into account current levels and forecasts of short-term and long-term government and corporate fixed-income yields, inflation, stock prices, GDP, and corporate earnings, among other factors. The model's output is expressed in terms of standard deviations to the mean, or sigma. The mean reading from the model, going back to 1960, is a modest premium for stocks (of 0.16 sigma), with a standard deviation of 0.97. The current valuation level is a 0.14 sigma premium for stocks, which is below the historical average and is not indicating that stocks are dramatically overvalued, even with the S&P 500 having logged all-time highs. Other valuation measures also show reasonable multiples for stocks. The current forward P/E ratio for the S&P 500 is approximately 19.6, which is within the normal range of 13-24 and down from 23 in 2021. The current S&P 500 dividend yield is 32% of the 10-year Treasury yield, compared to the long-run average of 39% and the all-time low of 18% during 1999. Looking ahead, we expect the results from our stock-bond valuation model to tilt toward stocks, as interest rates head lower in 2024 and earnings growth picks up. Based in part on the output from our Stock-Bond Barometer, our current recommended asset-allocation model for moderate accounts is 74% growth assets, including 72% equities and 2% alternatives; and 26% fixed income, with a focus on Core and Opportunistic segments of the bond market.

We don't want to get too excited about the Russell 2000 (IWM $208), but the index is pushing up against key chart resistance once again. IWM is poking its head above prior highs seen in 12/2023, 3/2022, and the January 2022 breakdown level near $207. Since that breakdown over two years ago, IWM has traded in a volatile range, with the bottom down at $160.

Started in 2008, Airbnb is the world’s largest online alternative accommodation travel agency, also offering booking services for boutique hotels and experiences. Airbnb’s platform offered 7.7 million active accommodation listings as of Dec. 31, 2023. Listings from the company’s over 5 million hosts are spread over almost every country in the world. In 2023, 50% of revenue was from the North American region. Transaction fees for online bookings account for all its revenue.