Kapoor: The dollar is likely to underperform heading into 2026

Market Performance & Investment Strategy - Many asset classes performed well year-to-date, making it a good year for US investors, with even stronger performance for overseas investments [2] - The weakness of the dollar contributed to the strong performance of overseas investments, although the dollar has recovered somewhat recently [3] - Morningstar anticipates the dollar will likely underperform other global currencies heading into 2026, suggesting investors should maintain meaningful non-US exposure in their portfolios [5][6][7] AI & Technology Sector - The Morningstar US Market Index shows about 30% of the index has stocks linked to an AI-related trade [9] - Overvaluation is emerging in the tech and telecom sectors [10] - Despite aggregate overvaluation in the AI trade, some large companies like Nvidia and Alphabet are considered slightly undervalued by analysts [11][12] - Nvidia is rated four stars with a fair value of approximately 240 USD [11] Corporate Bonds & Financial Health - Bonds issued by large hyperscalers are in high demand due to their strong cash flow, and investors are confident in their ability to repay debts [15][16] - These bonds trade at a slight premium relative to treasuries, reflecting investor confidence [16] Federal Reserve & Market Outlook - A Federal Reserve rate cut is anticipated heading into next year, but valuation is considered the key factor defining the market [18] - The ability of companies with premium valuations to deliver promised growth will be crucial [18]