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Commentary

No Margin of Safety in These Stocks

The runup in stock prices has all but erased the margin for error in many parts of the market.

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Although volatility has remained, the market have been on a roll recently. The S&P 500 this week reclaimed the 1,400 level it hadn't seen since May. Since the start of the year, the broad Morningstar U.S. Market Index is up nearly 13%, and up more than 20% over the last 12 months. The runup in the market has lifted valuation levels and all but erased the margin of safety in most corners of the market. And some areas are beginning to look downright expensive.

So what's driving stocks upward? The market seems to be relieved that the global economy has so far avoided any number of bad outcomes. Despite some close calls, the euro remains intact. Mario Draghi's pledge to protect the euro no matter what has, at least in the short term, calmed investor fears. The U.S. economy continues to bump along. And China's government is doing a decent job of easing off the gas pedal without sending the economy into a downward spiral.

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

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