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Stock Strategist

Our Outlook for the Industrials Sector

Industrial stocks as a whole are overvalued, but opportunities still exist.

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The market has been on a wild ride since our previous industrials-sector outlook in June, as fears over the housing meltdown and credit market woes have taken a collective toll. The Dow Jones Industrial Average has recovered nicely from its August lows, thanks to a half-percentage-point cut in the fed-funds rate, and the index is now just shy of its all-time high. Although we're generally opposed at Morningstar to prognosticating on the direction of the economy, the Fed's outlook for increased U.S. economic uncertainty is something we're not taking lightly. It may also be worth noting that in The Wall Street Journal's September Economic Forecasting Survey, economists estimated the risk of a recession within the next 12 months at 36%, 8 percentage points higher than just one month earlier.

Brian Nelson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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