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Stock Strategist

What's the Market Really Worth?

Our take on the market's true value.

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Here at Morningstar, our stock research is guided by the belief that investment success comes from buying shares of businesses when they are trading at discounts to their true values. Consequently, our equity analysts concentrate their efforts on estimating the fair values of the companies that they cover.

But while we focus our attention almost exclusively on bottom-up company analysis, our breadth of coverage (we currently have about 100 analysts covering almost 2,000 stocks), allows us to apply our equity research to the market as a whole. We can compute an aggregate fair value for the market by calculating a market-cap-weighted average of our fair value estimates for the stocks in an index. To determine if the market is over- or undervalued, we then compare the indexes' aggregate fair values to their current market prices.

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