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.

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

September lived up to its reputation. The S&P 500 logged a 4.8% decline, but outperformed the Nasdaq -- which dropped by 5.3%. That aligns with insider-sentiment data from Vickers Stock Research.

Stocks continued their rally on Thursday morning, a day after the Federal Reserve indicated that it would likely begin tapering bond purchases in November and conclude the program by mid-2022. It also suggested that it would raise interest rates next year in response to higher-than-expected inflation. On the employment front, the Labor Department said that first-time claims for state unemployment benefits rose to 351,000 for the week ended September 18, up from 335,000 a week earlier and above the consensus forecast of 320,000. The Dow rose 1.5%, the S&P 1.3%, and the Nasdaq 0.9%. Crude oil rose to nearly $73 per barrel, while gold traded near $1753 per ounce.

Small- and mid-cap stocks (SMID stocks) soared in 2019. They have underperformed large-caps over the past 12 months, but still may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be poised to rebound more quickly once COVID-19 vaccines are more widely distributed and the domestic service economy recovers. As well, the prices of SMID stocks generally are lower than the prices of large-caps. That said, SMID stocks can be risky. Still, despite the risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. Investors used to use a $2 billion market-cap threshold to define a small-cap stock and a $10 billion threshold for a mid-cap. The Russell 2000 index now includes numerous companies with market capitalizations above $15 billion. For our purposes, we use a threshold of $20 billion to define a SMID stock.

Measurements of sentiment reflect ongoing optimism and, so far, liquidity has trumped most technical indicators. Indeed, there is a fair amount of historical precedent for that.

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.