Skip to Content
Quarter-End Insights

Stock Market Outlook: A Little Too Buoyant?

The market overall looks slightly overvalued, with basic materials and energy the most overheated, and more value in healthcare and financial services.

Mentioned: , , , , , , , , ,
  • The Morningstar Global Markets Index has returned 7.6% year to date and 12.1% over the past year.
  • The market-cap-weighted price/fair value estimate ratio for our equity analysts' coverage universe is 1.03.
  • Financial services and healthcare are the most undervalued sectors, both with price/fair value estimate ratios of 0.94. Basic materials and energy are the most overvalued sectors, with price/fair value estimate ratios of 1.28 and 1.22, respectively.

Given that corporate earnings have been weak this year, it is somewhat surprising that equity markets have remained so buoyant. Stock prices have recovered from early 2016 fears regarding China's economy and low oil prices as well as June's reaction to the United Kingdom's vote to leave the European Union. Morningstar's director of economic analysis, Bob Johnson, has started to forecast a slowing of the U.S. economy as a result of such factors as weaker auto demand and the end of the Affordable Care Act boost in healthcare spending. Overall, our analysts find our coverage universe to be slightly overvalued.

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

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.