Is There Any Value Left in US Equities?

Morningstar Investment Management's Dan Kemp finds that six of 10 US equity sectors are currently significantly overvalued

Dan Kemp 19 January, 2018 | 1:28PM

President Donald Trump has held office for one year

The US equity market is incredibly diverse, so it is important to look beyond headline overvaluation metrics and understand the fundamental appeal at a more intricate level. By doing so, we can assess the opportunity set in a variety of ways including sector, size, style and even quality.

Using a long-term fundamental approach, we find that six of the 10 sectors are currently significantly overvalued. Unsurprisingly, this includes some of the so-called hot sectors, including technology, but also consumer discretionary, materials and industrials. We find the primary drivers of these overvaluations are stretched profit margins combined with high prices relative to long-term cash flows.  

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Alphabet Inc A1,903.42 USD0.48
Apple Inc142.43 USD-0.35

About Author

Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA

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