Skip to Content
Morningstar
Get 14 Days Free
Quarter-End Insights

Stock Market Outlook: Energy Compelling as Oil Ends Quarter Where It Began

The energy sector is the most attractive from a valuation perspective, particularly oil-services stocks.

Daniel Rohr
Mentioned:

Shares of U.S.- and Canadian-domiciled firms, which account for roughly half of our 1,500-plus global coverage, look slightly less attractive following the Morningstar U.S. Market Index's 3% climb in the second quarter to June 25. The median North American stock trades 4% below our fair value estimate versus a 5% discount near the end of the first quarter. Meanwhile, the share of 4- or 5-star stocks marginally exceeds those rated 1 or 2 stars: 30% versus 25%. The global picture is similar, with the median stock at a 4% discount and the share of "buys" exceeding that of "sells" 32% versus 26%.

  • Energy continues to rank as the most compelling sector from a valuation perspective, with oil prices ending the quarter roughly where they began. We see particular opportunity in oilfield-services stocks.
  • We see a relatively large share of buying opportunities in the consumer cyclical sector. The auto, travel and leisure, and entertainment industries trade at the most attractive valuations.
  • The utilities sector looks overbought as investors clamor for yield. The median utility trades at a 12% premium to our fair value estimate, and the sector is home to only three stocks we rate 4 or 5 stars.

Daniel Rohr 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.