Market Volatility | Help | Morningstar

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When there are large declines in major stock indexes, such as the S&P 500, the first thing to remember is that volatility, even when significant, is par for the course in the investment world. Investors who take a more measured approach may find opportunities to buy high-quality stocks that are undervalued and trading in the 5-star range of the Morningstar Rating for stocks.

Our Markets section is a great place to begin your research and analysis, as outlined in this helpful video featuring US Market Strategist Dave Sekera. When a stock's current price is below our fair value estimate, the stock is undervalued. The same concept applies to the stock market as a whole.

Start by navigating to the US Market Fair Value chart, which shows the median price to fair value of all the stocks covered by Morningstar equity analysts; the data reflect prices from market close two days prior. When the US Market Fair Value chart indicates that the market is undervalued by 10% or more, there are usually several high-quality stocks with share prices that have been dragged down by the systemic risk of the market—but you can still find opportunities even if the market isn't undervalued to that extent.

We encourage Morningstar Investor subscribers to use the Screen With Investor feature, located just below the chart, to further evaluate these undervalued stocks. Don't have a subscription to Morningstar Investor yet? Start your free trial today.

Selecting Screen With Investor opens a pre-built screen for undervalued stocks in the Investor Screener (similar to how Best Investments lists function). The image below shows additional filters you can use to focus on higher-quality companies. The filters to select are:

Ratings: 5 stars
Economic Moat: Wide and Narrow
Capital Allocation: Exemplary and Standard

In this example, we've opted to use the pre-defined Valuation view. You can add more data points by selecting Data & Columns as you perform your analysis. You can then select any security name to open its corresponding stock quote page, which contains our in-depth analysis on each stock.

Intro to Markets

Get to know the features of the Markets page.
Market Volatility

Sharp declines can also bring opportunities.

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