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As Bull Market Hits Record, Stocks Slightly Overvalued

The technology sector looks the most pricey today while communications services appears to be the cheapest.

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With the current bull market now the longest in history and the S&P 500 reaching an all-time high this week, we thought it would be a good time to check in on our market fair value.

This metric shows how big of a gap, on average, we see between market prices and our estimate of intrinsic value across the entire market or a specific sector.

The current ratio for all rated stocks is 1.02. This indicates that the market is slightly overvalued. That compares to a 52-week high of 1.11 seen in January and a 52-week low of 0.97 reached in April. 

There isn't a large gap in average valuations by sector. The most overvalued is technology at 1.06--that's 6% above our estimates. The industrials, consumer cyclical, and basic materials sectors are close behind, looking 4% overvalued. 

The most undervalued sector is communications services at 0.96--that's 4% below our estimate of intrinsic value. Some of our top picks in the communications services sector include Comcast, China Mobile, and BT Group.

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