Market Analysis Report: Morningstar CEO's 2026 Outlook & Implications

On November 24, 2025, Kunal Kapoor, Global CEO of Morningstar, shared key market insights during a CNBC interview (via YouTube):

1. 2024 has been a strong year for markets
2. Warning of potential AI sector overvaluation
3. Recommendation for global diversification
4. Expectation of another Federal Reserve rate cut in 2026
5. Projection that the US dollar will underperform heading into 2026 [0]

• Sector Performance
  : Healthcare (+1.73%) and Industrials (+1.52%) led gains, while Technology sectors had the smallest increase (+0.14%)—aligning with Kapoor’s AI overvaluation warning [1].
• Dollar Sentiment
  : Kapoor’s dollar underperformance projection is consistent with current analyst consensus, which expects a gradual weakening of the USD in 2026 [4a,4b,4c].

• Fed Policy
  : Multiple institutions forecast rate cuts in 2026:
  • RBC Wealth Management: Two 25bp cuts to 3.5% upper bound [3a]
  • Goldman Sachs: Two cuts in March/June to 3-3.25% terminal rate [3b]
  • JPMorgan: Market pricing for ~80bp of cuts in 2026 [3c]
• Dollar Outlook
  :
  • Cambridge Currencies: Dollar Index (DXY) to reach low-90s by end-2026 [4a]
  • Scotiabank: ~6% drop in DXY through 2026 [4b]
  • Morgan Stanley: Potential 10% USD loss by end-2026 [4c]

• AI Sector
  : Growing caution amid valuation concerns (reflected in Tech’s muted performance)
• Global Diversification
  : Increased interest in non-US equities as the dollar weakens
• Fixed Income
  : Expectations of lower rates supporting bond prices

Metric	Details	Source
2026 Fed Rate Cuts	2-4 cuts (50-100bp total) to 3.0-3.5% range	[3a,3b,3c]
DXY 2026 Forecast	Range:92-98; Average:~94-96	[4a]
USD Depreciation Projection	6-10% decline by end-2026	[4b,4c]
Top Performing Sector (2025-11-24)	Healthcare (+1.73%)	[1]
Lowest Performing Sector	Technology (+0.14%)	[1]

• USD
  : DXY index (bearish outlook)
• AI-Related Stocks
  : Semiconductors (NVDA), cloud computing (MSFT), AI software (GOOG) (valuation risk)
• Global Equities
  : Emerging markets (EM) and developed ex-US (DMX) (diversification benefit)

• Outperformers
  : Healthcare, Industrials
• Underperformers
  : Technology (near-term)

• Beneficiaries
  : US export-oriented companies (weaker dollar)
• Challenged
  : US import-heavy firms (higher input costs from weaker dollar)

1. AI Valuation Metrics
   : Need for P/E, P/S ratios relative to historical averages to quantify overvaluation
2. Fed Cut Timing
   : Clarification on exact meeting dates for rate cuts (varies across institutions)
3. Dollar Impact
   : Specific asset class correlations (e.g., EM equities vs USD weakness)

• Kapoor’s Views
  : Align with Morningstar’s value-investing philosophy (caution on overvalued sectors)
• Analyst Consensus
  : Broad agreement on weaker dollar and Fed cuts, but variation in magnitude/timing
• Market Reaction
  : Tech’s muted performance suggests investors are already pricing in AI valuation concerns

• AI Overvaluation
  : Users should be aware that Kapoor’s warning may significantly impact returns for AI-related stocks [0]
• Dollar Depreciation
  : This development raises concerns about USD-denominated investments, particularly for unhedged portfolios [4a,4b]
• Fed Policy Uncertainty
  : Varying rate cut forecasts create volatility risks for fixed income and equity markets [3a,3b,3c]

1. Fed Meeting Minutes
   : For clues on rate cut timing
2. AI Sector Earnings
   : To validate valuation levels
3. DXY Index
   : Track monthly trends toward 90s range
4. Global Equity Performance
   : Compare EM/DMX returns vs US equities

[0] CNBC Television, “Kapoor: The dollar is likely to underperform heading into 2026”, YouTube, 2025-11-24, URL: https://www.youtube.com/watch?v=KYh3706Q4sI
[1] Sector Performance Analysis, Retrieved:2025-11-24 UTC
[3a] RBC Wealth Management, “The Fed raises the bar for lower rates”, URL: https://www.rbcwealthmanagement.com/en-us/insights/the-fed-raises-the-bar-for-lower-rates
[3b] Goldman Sachs, “The Fed Is Forecast to Cut Rates in December as Employment Cools”, URL: https://www.goldmansachs.com/insights/articles/the-fed-is-forecast-to-cut-rates-in-december-as-employment-cools
[3c] JP Morgan Asset Management, “2026 Year-Ahead Investment Outlook”, URL: https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/2026 Year-Ahead Investment Outlook.pdf
[4a] Cambridge Currencies, “USD Forecast 2026: Will the Dollar Strengthen or Fall?”, URL: https://cambridgecurrencies.com/usd-forecast-2026/
[4b] Scotiabank, “An in-depth look at the U.S. dollar”, URL: https://www.gbm.scotiabank.com/en/market-insights/article.research-and-market-commentary.in-depth-look-at-us-dollar.html
[4c] Morgan Stanley (via Yahoo Finance), “Here’s What ChatGPT Thinks About the Future of the US Dollar”, URL: https://finance.yahoo.com/news/chatgpt-thinks-future-us-dollar-203406931.html
[4d] Reuters, “Traders to stay net short the US dollar”, URL: https://www.reuters.com/business/traders-stay-net-short-us-dollar-say-fx-forecasters-clinging-bearish-views-2025-11-05/
[4e] Morningstar, “3 Big Ideas to Help Investors Prepare for 2026”, URL: https://www.morningstar.com/markets/3-big-ideas-help-investors-prepare-2026

: This analysis is for informational purposes only and does not constitute investment advice. All decisions should be based on personal research and financial goals.
: Past performance is not indicative of future results. Market conditions are subject to change without notice.
© 2025 Financial Market Analyst Report