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Quarter-End Insights

Stock Market Outlook: China Rebalancing Presents Winners and Losers

China's economic rebalancing means an overvalued basic materials sector, but consumption growth creates opportunities in areas such as telecom.

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  • The Morningstar Global Markets Index has returned more than 17% year to date and 18% over the past year.
  • The market-cap-weighted price/fair value ratio for our equity analysts' coverage universe is 1.04.
  • Communication services is the most undervalued sector, with a price/fair value ratio of 0.94. Basic materials is the most overvalued sector, with a price/fair value ratio of 1.37.

Although communication services does stand out as the most undervalued sector when looking at price/fair value of the companies we cover, we don't have any 5-star ratings on communication services companies, and in fact only 11 companies in this sector sport a 4-star rating.

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