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ETF Specialist

An Opportunity in a Fairly Valued U.S. Equity Landscape

Beaten down by the specter of rising interest rates, a sluggish emerging-markets consumer, and currency headwinds, the U.S. consumer staples sector offers strong dividends, high-quality stocks, and an attractive relative valuation.

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U.S. stocks have little to show for themselves thus far in 2014, with the S&P 500 Index posting a slightly negative return (negative 0.8% as of this writing). However, after U.S. equities' tremendous gains in 2013, Morningstar's equity analysts consider the U.S. stock market to be fairly valued. The S&P 500 Index currently trades at a price/fair value of 1.01, while Morningstar's coverage universe is trading at a price/fair value of about 1.03.

While Morningstar's equity analysts deem all broad U.S. equity sectors fairly valued, we see a potential buying opportunity for contrarian investors in the beleaguered consumer staples sector, which currently has one of the lowest price/fair value ratios of any U.S. equity sector, at 0.97.

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