Dallas, Texas – Morningstar’s Moat Index and SMID Moat Index outperformed their benchmarks in August, driven by stellar stock choices. The U.S. equity markets saw a rise in August, with the S&P 500 gaining 2.4% amid expectations of Federal Reserve rate cuts following Chairman Jerome Powell’s comments at Jackson Hole.

Powell’s remarks hinted at a shift in policy focus from inflation control to supporting economic growth, leading to a market rotation from tech giants to value stocks. This rotation was backed by a stabilized job market, controlled inflation, and the anticipation of potential rate cuts at the Fed’s September meeting. The market’s response reflected optimism in policy easing and economic resilience amidst ongoing geopolitical tensions.

The Morningstar Wide Moat Focus Index, also known as the Moat Index, continued its strong performance from July into August, outperforming the S&P 500 Index by 200 basis points. This success was attributed to solid stock selection and well-placed sector allocations, particularly in consumer defensive and healthcare segments.

While smaller U.S. companies took a breather in August after a remarkable rally in July, the SMID Moat Index managed to gain 1% during the month, showcasing the strength of favorable stock selection. This outperformance was not due to sector over or underweights but rather prudent stock picks within the cohort.

Within the Moat Index, cybersecurity and coffee companies like Fortinet and Starbucks stood out as top contributors in August. Fortinet’s cybersecurity platform approach and strong earnings release, along with Starbucks appointing a new CEO, fueled significant stock price increases during the month.

On the other hand, companies like Etsy, Estee Lauder, Pfizer, Boeing, and Emerson Electric detracted from the Moat Index’s performance in August. These companies faced challenges that impacted their stock prices negatively during the month.

In the SMID Moat Index, companies like DoorDash and Veeva Systems led the way in August with strong performances. DoorDash’s record-breaking earnings and Veeva’s superior cloud-based solutions for the life sciences industry contributed to their positive stock movements.

However, companies like Chart Industries, Bath & Body Works, The Carlyle Group, Charles River Laboratories, and Asbury Automotive Group dragged down the SMID Moat Index’s performance in August, facing obstacles that hindered their stock performance.

Overall, the Moat Index strategies offered by VanEck, powered by Morningstar’s research, provide investors with opportunities to access quality companies at attractive valuations. These strategies cater to different investment preferences, including wide moat, small-mid cap moat, wide moat growth, and wide moat value companies. Investors are advised to consider the risks involved before investing in these strategies.