Liquidity and credit woes stemming from heavy issuance of subprime mortgages continue to wrack the financial markets as 2007 draws to a close. Financial and retail stocks are among the most battered, as investors worry about firms requiring large amounts of short-term financing or depending on robust consumer spending. Still, despite a seemingly endless parade of bad economic news and pleas from the financial community to the Federal Reserve for lower interest rates, the Morningstar U.S. Market Index has managed to post a 5.7% gain for the year through Dec. 17.

Slicing the market by sector, most areas are cheaper now than three months ago, in our opinion. In nine out of our 12 sectors, the median price/fair-value ratio is less than 1.0. We see the largest discounts in consumer (retail stocks in particular look cheap to us), financials, media, and hardware (where semiconductor stocks are cheap again). During the past quarter, we also raised our fair value estimates for a host of energy companies based on a more-bullish long-term oil forecast. The median energy stock we cover is now 6% undervalued.

To get a complete analysis of the stocks and funds in your portfolio, click the Portfolio link at the top of this page. Also, check out our Analyst Reports on 2,000 stocks and 2,000 funds. To read our Stock and Fund Analyst Reports and give your portfolio a complete checkup, try our Premium Membership service free for 14 days.