Morningstar: Equity market trading at a 20% discount to fair value

Per Dave Sekera, CFA @ Morningstar:

“With equities selling off 24% year to date, it appears to us that the market has overcorrected to the downside. According to a composite of the stocks we cover that trade on U.S. exchanges, the equity market is significantly undervalued and is trading at over a 20% discount to fair value.

While near-term conditions may pressure earnings in the short term, at current valuations we think the market has fallen more than enough to incorporate those headwinds. In our view, we think the market is overly pessimistic regarding the long-term prospects for equity valuations.”