- Although the market continued to rise in the second quarter, stocks are now trading at 94% of fair value, a small improvement from the 97% we saw last quarter, based on stocks under Morningstar coverage using a market-capitalization-weighted average.
- The risk/reward ratio does not favor bond investors, with credit spreads tight and the potential for higher rates looming.
- We think the outlook for equity markets is reasonably good over a longer time horizon, given pockets of undervaluation, an overall market valuation that is not too demanding, and our expectation that the bond market will correct, sending more assets toward equities. We expect higher volatility in the short term, however.
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Heather Brilliant does not own shares in any of the securities mentioned above. Find out about Morningstar’s