2023 U.S. Stock Market Outlook
Often, the market acts like a pendulum and can quickly swing from overvalued to undervalued.
Now is one of those times.
As much as we thought stocks were overvalued coming into 2022, we now see the markets as trading at a deep discount to our fair value estimate.
Compared with a composite of the more than 700 stocks we cover that trade on U.S. exchanges, we calculate that the market is trading at a price/fair value of 0.84, a 16% discount to an aggregate of our intrinsic valuations.
According to our valuations, investors appear best positioned in a barbell-shaped portfolio by overweighting the value and growth categories and underweighting the core category. Across capitalizations, large-cap and mid-cap valuations are in line with the broad market average, whereas small-cap stocks are trading at an over-30% discount.