Welcome to the new tw.morningstar.com! Learn more about the changes and how our new features help your investing success.

Stock Market Outlook: Time to Play Defense

In a market leaning toward the overvalued side, investors must dig deeper to unearth buying opportunities.

Morningstar Equity Analysts 26 March, 2014 | 10:30
Facebook Twitter LinkedIn
  • Markets have largely recovered from January's correction, and the average valuation of our coverage universe continues to tick up, standing at 104% of fair value going into the second quarter (all market and geographic averages are on a market-capitalization-weighted basis).
  • In a market leaning toward the overvalued side, investors must dig deeper to unearth buying opportunities. However, macro instability has created some buying opportunities, especially in a number of energy and high-quality consumer staples stocks.
  • On a global scale, firms that our analysts cover in Asia Pacific now look to be the most undervalued, reversing the region's most overvalued position at this time last year. Conversely, North America and Europe look to be the most overvalued.

 

Macro Instability Made for a Rocky First Quarter

Markets offered a bumpy ride during the first quarter and, with the S&P 500 up less than 1% year to date, investors aren't much better off than when we started 2014. Unrest has resurfaced in Turkey, and the crisis in Ukraine has brought uneasy relations between Russia and the Western allies to a head. Although both these markets are a drop in the global macroeconomic bucket, the turmoil has sparked wider concern regarding slowing growth throughout the emerging markets, which have proven to be a key source of growth for large multinationals.

In addition to macro instability, markets face other uncertainties. The U.S. Federal Reserve has been scaling back its asset purchase program, stemming the flow of free money that had previously lubricated markets. And we have yet to see the full fallout of how the severe weather's impact on the consumer will affect corporate earnings.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Member.

Register For Free
Facebook Twitter LinkedIn

About Author

Morningstar Equity Analysts  Morningstar stock and fund analysts cover 2,000 mutual funds, 2,100 equities, and 300 exchange-traded funds.

Audience Confirmation


By clicking "accept" I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See "Cookie Consent" for more detail.

  • Other Morningstar Websites
© Copyright 2021 Morningstar, Inc. All Rights Reserved.      Terms of Useund      Privacy Policy.    Cookie Consent
© Copyright 2021 Morningstar Asia Ltd. All rights reserved.

Terms of Use        Privacy Policy        Cookies