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ETF Specialist

An Opportunity in a Fairly Valued U.S. Equity Landscape

Beaten down by the specter of rising interest rates, a sluggish emerging-markets consumer, and currency headwinds, the U.S. consumer staples sector offers strong dividends, high-quality stocks, and an attractive relative valuation.

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U.S. stocks have little to show for themselves thus far in 2014, with the S&P 500 Index posting a slightly negative return (negative 0.8% as of this writing). However, after U.S. equities' tremendous gains in 2013, Morningstar's equity analysts consider the U.S. stock market to be fairly valued. The S&P 500 Index currently trades at a price/fair value of 1.01, while Morningstar's coverage universe is trading at a price/fair value of about 1.03.

While Morningstar's equity analysts deem all broad U.S. equity sectors fairly valued, we see a potential buying opportunity for contrarian investors in the beleaguered consumer staples sector, which currently has one of the lowest price/fair value ratios of any U.S. equity sector, at 0.97.

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