Skip to Content
Stock Strategist

Measuring the Market's Value

As the third quarter begins, we dig into the fair value of the Dow once again.

Mentioned: , , , , , , , , ,

Morningstar has more than 100 equity analysts who estimate fair values for more than 2,000 stocks. Because we have such breadth of coverage, we can assess the valuation of major market indexes by calculating market-cap weighted averages of our fair value estimates for the stocks in the benchmarks. Then we can determine if the indexes are over or undervalued by comparing their aggregate fair values to their current market prices.

Every quarter, we do just that for the three major market indexes--the Dow, the S&P 500, and the Nasdaq 100. As of the end of the second quarter, it appears that the market, as measured by these benchmarks, is still trading right near our estimate of the fair value (see table below), as it was last quarter when we last updated this topic.

Sonya Morris does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.