Schwab Sector Views: Downgrading Discretionary.
Schwab Sector Views reflect a three- to six-month outlook and are appropriate for investors looking for tactical ideas. We typically update our views every two weeks, so we encourage investors to check back often for our latest outlook.
After admittedly fighting against the market trend for much of the year, we are now downgrading our view on the consumer discretionary sector to marketperform from outperform. In our view, the majority of the fundamentals continue to improve for the consumer, with jobs being added, interest rates staying low, inflation relatively benign, and hints of wage increases finally emerging. And, in fact, we have seen better relative performance over the past month or so but not to the point of outperforming the overall market. Investors who have been at it for any length of time quickly learn that being right on fundamentals doesn’t always lead to the market results expected. Even though the picture for the consumer seems to be improving as we expected, stocks are not responding and it’s time to lower our view. Sectors tend to move broadly with the economic cycle, and the consumer discretionary sector is typically an early mover in an economic expansion—much as we saw through last year. However, as the expansion matures, discretionary performance tends to level off, and that’s the point we believe we’re at now. We want to reiterate that we’re not moving to an underperform rating as there are still a number of positives for the group, but moving to a neutral position seems prudent.
The other change we’re making is to upgrade the energy sector to outperform. After holding off on such a move last month in the wake of a surge following the escalating geopolitical tensions, we believe now is the time to raise our outlook. We have seen some of the quick gains achieved on the news of Iraqi violence pull back a bit, providing for us a more attractive entry point. Additionally, U.S. growth continues to improve, evidenced by improving manufacturing surveys and better employment data, which should help to raise the demand for energy. And energy prices seem to have stabilized somewhat with risks to the upside more prevalent, in our view, as the possibility of temporary supply cuts exist and transportation issues continue to plague parts of the sector, helping to support prices. Finally, the global picture is also improving, although more slowly than the U.S., as Europe has rebounded modestly, along with Japan, while China has stabilized and there is hope in India that much needed infrastructure projects will finally start to be implemented. As a result of these facts, and again where we seem to be in the economic cycle, we believe upgrading our view of the energy sector is the right move.
As always, we strongly suggest looking for more details on all of our specific sector views and information on our outperform and underperform ratings by reading the expanded analysis below, and then making adjustments to portfolios as you see fit. One final note: Our tactical recommendations change quickly at times as we continually monitor economic progress and factors influencing individual sectors, so check back often.
Schwab Sector View
S&P 500 benchmark weight
Date Sector View last changed
Year-to-date return as of 07/16/2014
S&P 500® Index (Large Cap)
Source: Schwab Center for Financial Research and Standard and Poor's as of July 15, 2014.
Consumer discretionary: Marketperform
After warning of such a move for the last month, we are now lowering our outlook on the consumer discretionary sector to marketperform from outperform. Despite many of the underlying fundamentals of the group continuing to improve in our view, the stocks haven’t followed suit to the degree we believed they would. Performance has improved of late and we aren’t dropping to a negative view, but believe that movement more in line with the overall market is more likely in the near term. Sectors tend to move along with the broad economic cycle and discretionary tends to outperform in the early stages of an economic expansion, which we now appear to be moving past.
As mentioned, the fundamental picture seems to be improving as we’ve seen some of the larger headwinds facing consumers dissipate somewhat, but the improvements perhaps haven’t been rapid enough to drive the stocks higher. Consumers have reduced their debt load and the job market improvement appears to be accelerating to a modest degree, but housing improvement has stalled recently, potentially putting a damper on optimism. Additionally, we are starting to finally see some initial signs of wage growth, especially in more professional areas of the economy, which should help to boost confidence and spending, but lower ends of the spectrum continue to struggle with flat wages and few immediate prospects for improvement. Finally, while we don’t believe oil prices will rise to a level that will be overly damaging to the consumer due to the situation in Iraq, we do acknowledge that the risk of such an occurrence has risen.
We have long acknowledged the American consumer has shown a remarkable ability to overcome obstacles, and are still optimistic they will continue to do so, but believe the discretionary sector’s performance will be muted, resulting in our modestly downgraded view.
Positive factors for the consumer discretionary sector:
- Inventories remain relatively lean. This should provide retailers with some pricing power as activity picks up.
- The Federal Reserve continues to be quite accommodative, despite pulling back on quantitative easing, which could help to support the consumer.
- Global central banks in developed markets appear to be firmly in an easing stance, which could help bolster the consumer.
- The job market, although still somewhat sluggish, appears to be improving at a steady rate.
- Wages are starting to show signs of improvement, although it’s too early at this point to declare a definitive trend.
Negative factors for the consumer discretionary sector:
- Credit standards remain relatively tight, especially around the housing market, although there are signs of easing.
- Uncertainty and increased costs surrounding the Affordable Care Act could dent consumers' ability and willingness to spend.
- The housing market’s improvement has stalled for the time being.
- Fierce competition in the retailing space appears to be impacting margins, which could grow into problems for stock performance if it gets too severe.
- Talk of sooner-than-expected Fed rate hikes due to an inflation scare would likely be a hindrance to the consumer discretionary sector.
- Increased concern over Iraqi oil production could cause oil prices to rise to a level that would dent the ability of the consumer to spend.
Consumer staples: Underperform
The staples group, traditionally thought of as a defensive group, has underperformed as of late, as investors appear to be buying in to the economic expansion we see developing. We believe this will continue as the economy improves and investors search for higher returns. However, if economic expectations were to deteriorate substantially, that view would likely change, but we don't believe that's the most probable course, leaving us confident in our current rating.
Although a consumer group, in contrast to the discretionary sector, the staples group is considered defensive because it tends to sell items that will be purchased regardless of the economic environment, such as toilet paper and laundry detergent. While this is a sector positive during tough economic times, it can also be a negative during times of improving economic conditions as consumers don’t typically expand their spending on such items as the economy improves—demand tends to stay relatively constant. And with the economic outlook showing signs of brightening further, the more defensive group could be in for a bit of a rough ride.
Additionally, staples companies typically deal with relatively narrow margins, which can make it difficult to rapidly increase profitability and thus support swift growth in stock prices.
Positive factors for the consumer staples sector:
- Staples retailers have aggressively cut costs and are attempting to create more perceived value for consumers, which could support sales.
- The defensive consumer staples group could benefit from tighter consumer wallets if consumer confidence takes an unexpected hit.
Negative factors for the consumer staples sector:
- Competition continues to accelerate and is exacerbated by the increasing emergence of low-cost, emerging market production, which could potentially cause pricing power in the group to evaporate by compressing margins and squeezing earnings.
- An acceleration of economic growth would likely cause the staples sector to underperform.
- Numerous central banks are now firmly in easing mode in an effort to stimulate the economy, which could hurt the more defensive sectors.
- Input costs have risen as of late, and the ability to fully pass these costs on to consumers remains questionable.
We are raising our view on the energy sector to outperform from marketperform. We decided to wait to lift our view following the escalation in geopolitical concerns believing the immediate sharp gains would dissipate a bit, and now we’ve seen that come to fruition. With U.S. growth improving and the global environment stabilizing, along with continued escalated geopolitical risks that lead us to believe price risks are on the upside, we believe now is the time to raise our outlook on the energy sector.
Energy, and especially crude oil, tends to have a large speculative element which can make it difficult to focus on the underlying fundamentals, but we believe that’s exactly what investors should do. Although there are likely to be many twists and turns, we believe it ultimately comes down to supply and demand factors, influenced largely by the global economic outlook. And right now, the Fed continues to be quite accommodative, notwithstanding the continuing tapering process for quantitative easing, and global growth appears to be at least stabilizing and looking to improve over the coming months. Additionally, geopolitical tensions seem likely to remain elevated over the near term, leading us to believe price risks are largely to the upside.
We believe the US and Chinese economies will ultimately drive the direction of the sector. To that end, China’s near-term response to its economic softening had been almost nonexistent but we are starting to see some modest stimulus measures. And in the U.S., the Federal Reserve continues to be extremely aggressive, although it is slowly reining in its quantitative easing efforts.
Moving past the short-term movements in the energy markets, economic developments are starting to lean toward the energy demand picture improving in our view. The U.S. economy is improving, Japan’s recovery stalled temporarily but may be regaining strength, and Europe’s economic situation continues to be in question but there are signs that the economy is turning around and the ECB is finally taking aggressive action. We believe economic growth in the developed world, including the U.S., will accelerate in coming months.
Longer term, we have had a mainly positive outlook for the energy sector in place for some time and believe an upgrade is now the appropriate move to make. Developing and emerging countries will almost certainly continue to need more fuel, demand will likely continue to grow but we also note that supplies are increasing as well leaving us with a relatively neutral view for at least the time being.
Positive factors for the energy sector:
- Developing nations will likely need more energy as they improve their infrastructures and modernize their economies.
- Global central banks in the developed world appear to generally have an easing bias, which could help the more cyclical sectors such as energy.
- Geopolitical tensions have risen, which, if sustained, could result in higher oil prices and improving sector performance.
Negative factors for the energy sector:
- Supplies could increase dramatically with a renewed commitment to exploration and technological improvements. We've already seen new discoveries and existing fields produce more oil than originally projected.
- Conservation efforts and new technology could impact the growth in demand for energy products.
- Severe pollution problems in China could result in mandates to cut energy use.
The year-to-date performance of the financial sector has now moved within shouting distance of the overall market. The resilience of the overall group continues to impress, as does the ability for much of the sector to quickly shift directions when required, leaving us with a continued marketperformance view.
There are still risks for the group, although we believe the sector’s fundamentals and broader macroeconomic developments help to offset some of those risks. A still accommodative Fed provides financial companies with low borrowing rates on money that they can potentially then lend out at higher rates. And although the spread isn’t historically large, the possibility for longer-term interest rates to move higher, while the short end remains anchored by the Fed, provides the opportunity for margin expansion. Also, balance sheets of consumers and companies appear to be improving. Corporate cash balances are high and household debt service as a percentage of disposable income for consumers has fallen. This has enabled banks to gradually reduce the reserves on their balance sheets for loan losses. And the continued, although slowing, improvement in the housing market should, in our view, bolster financials as they are able to get foreclosed homes off their balance sheets more quickly, although mortgage demand has softened, which is worth paying attention to.
We still have concerns, and chief among them is the regulatory environment. Already-instituted new capital requirements restrict the amount of money banks can lend, limiting profit potential for many of them. Additionally, uncertainty remains over the impact of Dodd-Frank regulations that have been decided on, while there are still more decisions to come. Finally, due to the recent publicity, more regulations could be coming in the near future, which to some extent may be useful and needed, but we often see an overreach in situations like this.
We maintain relative confidence in the ability of the financial industry to reshape itself and adjust to the changing environment as it has done so many times, but are watching developments in Washington carefully to determine what our next move may be.
Positive factors for the financials sector:
- Most financial institutions have paid back government loans and are increasing share buybacks and dividend payments, illustrating their growing health and stability.
- Recent delinquent loan estimates have decreased among credit card companies, indicating improving balance sheets.
- Lending standards have loosened somewhat, which could help loan volume grow.
- Businesses could increase borrowing, as they take advantage of low rates and look to spend on projects they’ve been . postponing in light of economic and fiscal uncertainty.
Negative factors for the financials sector:
- Rising interest rates could dampen demand for mortgages, which could impact profits in certain areas of the financial sector.
- Government intervention, such as new limits on certain fees that can be charged, has already started to affect the financial industry and could hold back performance for the foreseeable future.
- A new round of foreclosure uncertainty or a push by the Federal government to again loan to higher risk borrowers could pose problems for the financial sector.
Health care: Marketperform
We’ve liked the health care sector for some time as the fundamentals for much of the group have remained attractive to us but admit to missing a good move in the group as we remained concerned about the uncertain political environment, leading us to maintain our marketperform rating. Health care continues to be at the center of much political discussion. However, implementing the numerous provisions of the Affordable Care Act still remains under debate and seem to change on a relatively frequent basis—causing some additional volatility in the group.
Containing costs remains a high-profile issue and increased government involvement could mean a more challenging environment for at least some of the space. Until we get a better handle on what impact the current negotiations have on the economy as a whole and the health care sector specifically, we believe a marketperform rating is appropriate.
But it’s also important to remember that the political aspect is only one piece to the puzzle and that investors should also look to the overall fundamental picture. In our view, these fundamentals look good as valuations appear fair through most of the sector, balance sheets are solid, the group has good dividend yields, and the overall cost structure appears to have been much improved. And while the fight in Washington is largely on how to pay for health care, there seems to be little debate that there is an increasing demand for health care products and services, which is typically a good sign for an industry.
Positive factors for the health-care sector:
- The aging population could provide a boon for the industry as an increasing number of Americans require more extensive drug treatments and medical care.
- Americans are increasingly obese, which results in a greater need for medical attention due to the myriad of health issues that coincide with obesity.
- Balance sheets in the health-care sector remain flush with cash, boosting the possibility of higher dividend payments, share-enhancing stock buybacks, and mergers and acquisitions.
Negative factors for the health-care sector:
- Government regulation will likely continue to increase during the coming years as an aging population demands intervention in order to theoretically lower their out-of-pocket health-care costs.
- Pricing regulation potential concerns have recently weighed on the biotech industry and could continue should worries escalate.
- The current and fiscal situation in Washington creates continued uncertainty regarding the group.
Although the global manufacturing picture still appears a bit murky, we continue to believe in our recommendation on the group of outperform. The national ISM Manufacturing Index remained in territory depicting expansion, while new orders continue to accelerate. Additionally, Europe remains somewhat weak but there are some encouraging signs as governments appear to be shifting off some of the more onerous austerity policies that could help to boost growth and the ECB is becoming more aggressive, and Japan’s recovery appears to be moving again after temporarily stalling after the tax hikes earlier this year. This somewhat disjointed, but likely improving picture leads us to believe that an outperform rating is appropriate.
We have concerns, but they are slowly being balanced out as Europe is apparently out of their recession and has made progress on their debt crisis, China’s growth is slow relative to history but they appear to be making structural improvements, India’s bureaucracy remains troubling although there are nascent signs of reform after the recent election, and U.S. political concerns appear to have lessened as a budget agreement was reached, likely taking the possibility of another government shutdown off the table. We believe corporations have been cautious, but the investment picture appears to be brightening.
We also continue to watch fiscal austerity measures around the world, which could dampen growth in the industrials arena, but as mentioned above do appear to be dialed down at least somewhat, painting a positive picture for industrial stocks in our view.
Positive factors for industrials:
- Corporate balance sheets remain relatively cash rich, which could help push management to invest in new, more-efficient equipment to help offset production losses due to layoffs.
- Lending standards, while still tight, have started to loosen, which should help boost capital spending.
- Inventories in much of the manufacturing area appear relatively low, leading to the possibility of a demand-inspired rebuilding phase.
- Countries are now considering undoing some of their more stringent austerity-related policies, which could help to boost economic activity and demand for industrial goods.
Negative factors for industrials:
- Access to credit remains limited in many cases—among smaller businesses, for example—which tends to dampen spending plans.
- Fiscal austerity, if maintained, could result in slower economic growth and decreased demand for industrial products.
Information technology: Outperform
The tech sector has bounced back over the past few months, the start of a trend we believe will continue. We are impressed with the way the sector held up during the selling seen earlier and continue to hold an outperform rating on the group. The innovation and entrepreneurial spirit that seems to pervade the tech sector are factors that are sometimes difficult to quantify but make us excited about the future of the sector and add to our reasons to have an outperform view on the group.
With large cash balances, increasing dividend payments, solid management in many cases and tight inventory controls, the tech sector appears far more stable than it was in the late-1990s environment that so many still remember. We've been touting this stability as one of the reasons to stick with the group and in fact the sector has outperformed during the past couple of downturns in the market, including the most recent one.
The fundamentals of the group also appeal to us. Companies that have underinvested in technological improvements during the past couple of years appear to be at the point where they need to upgrade equipment. Such investments are typically attractive because they tend to increase companies' efficiency and productivity at all levels.
As a result, companies can produce more with fewer workers—which allows them to cut back on costs and potentially expand margins.
Additionally, balance sheets in the sector appear solid, with large cash balances and relatively low debt. This enables the group to increase dividends and pursue mergers and acquisitions that might help performance as competition is removed and expenses consolidated. We believe this also helps provide stability to the group, which in turn gives it a certain level of defensiveness mentioned above, contrary to its high-beta history.
Positive factors for information technology:
- Growth in business investment in technology is now outpacing growth in total business investment.
- Real tech investment has been below trend for several years, which could bode well for the future of the sector as spending returns to more normal levels.
- We're starting to see banks loosen lending standards, which could slowly help revive capital investments.
Negative factors for information technology:
- Increasing global competition, especially in areas with low labor costs, will likely continue to compress profit margins.
- We see signs that companiesremain hesitant to increase capital spending, although that is starting to lessen.
The materials sector performance has improved as investors seem to be recognizing the improving global economic picture we believe is developing…slowly. This is a trend we believe will continue and that marketperformance is the most likely course over the next several months. However, there is still uncertainty surrounding global economic growth with a still tepid at best European environment, Chinese growth that has slowed based on the past several years, and a likely stronger U.S. dollar longer-term that dampens profitability from abroad. With aggressive responses from central banks and a reduction in austerity measures around the world having the potential to improve some of these issues, we are watching the materials group closely, but we continue to believe marketperform is the best place to be at the present time.
Accommodative monetary policy, as we are now seeing in most of the developed globe, has typically been a positive for the materials sector as growth expectations increase. These actions have not resulted in a surge in growth so far as some actions have been more timid than expected, however, but we view these as signs that important central banks around the world are starting to come over to the Fed’s view of bolstering growth. Additionally, we are starting to see a new potentially positive phenomenon as some indebted governments have scaled back on their austerity plans, and are focusing a little more on generating economic growth. This could provide a bit of a tailwind behind the materials sector, warranting a marketperform rating, with an eye toward another upgrade should global improvement take hold.
Positive factors for the materials sector:
- Developing countries continue to need more natural resources to support their infrastructure building.
- Global central banks in the developed world are now largely in easing mode, which should help to support economic activity and the materials sector.
- Some austerity measures seem to be easing, which could help to stimulate growth.
Negative factors for the materials sector:
- Chinese demand for processed commodities might be slowing as technological advances and a build-out of production facilities allow the country to produce more of its own materials. China recently transitioned from a net importer to a net exporter of steel.
- Wage costs are rising in the materials sector as we’ve seen skilled labor shortages in certain segments of the market.
- U.S. dollar strength could undermine the results in the materials sector.
The telecom sector remains concerning to us and we continue to rate the group at underperfrom. The yield provided by the sector, and traditionally defensive nature of the group, can make it attractive to investors in an environment where income is difficult to come by. But as we've seen, when interest rates start to rise, as we believe they will in the near future, the telecom sector could suffer.
The telecom sector has lost some of its traditional defensive appeal, in our opinion, given that the group has moved much of its business model from the historically stable, regulated fixed-line business to the more variable, consumer-dependent wireless arena, while also dealing with an onslaught of competition from a variety of sources. And although consumers are increasingly demanding more wireless services, which could boost revenues, costs remain elevated due to large equipment upgrade expenses which could make profitability more difficult.
Generally, many investors apparently do still view telecom as defensive, seeing the remaining fixed-line business as a cushion against variable revenues in less certain times. Additionally, dividend yields in the space have been relatively attractive to income-hungry investors. But we are seeing wage costs, which had been under control, start to rise, while announcements of increases in capital expenditures could reduce margins, causing us some concern.
Competition for increasingly budget-conscious consumers remains fierce, and telecom certainly hasn't been immune to bargain-hunting shoppers, as evidenced by declining pricing power in the space. We're watching developments in this area especially closely given that new products still seem to be enticing consumers to spend, but we wonder how many times the sector can draw from that well.
In contrast to the technology sector, companies in the telecom sector have a lot of debt on their balance sheets, so we continue to view the group with caution as interest rates continue to rise, and we feel comfortable sticking with our lower rating on this group for the time being.
Positive factors for the telecommunications sector:
- Wireless demand appears to be increasing as more communication and media devices move to the wireless arena, although some of that movement is likely to take away from fixed-line revenue.
- The higher dividends typically paid by telecom companies have attracted investors tired of paltry fixed-income yields.
Negative factors for the telecommunications sector:
- Consumer spending on telecom compared to total spending is now falling, which has typically coincided with underperformance for the sector.
- Net profit margins are declining for the telecom sector as competition squeezes margins.
- Capital expenditures in the telecom space are rising as companies look to improve and expand their networks, which could be a burden on profitability in the near future.
- The telecom sector has the highest debt-to-equity ratio of any nonfinancial sector. That could hurt the group in this time of tight credit.
The utilities sector has finally shown signs of returning to what we believed was the appropriate course, underperformance. We have been concerned about stock valuations in the utilities sector for some time as investors chased the relatively higher yields, and we cut the rating to underperform from marketperform. We continue to believe the most likely course for the utilities sector in the next several months is underperformance.
The Fed appears to be attempting to make riskier assets more attractive through extremely loose monetary policy, which we believe will make the utilities sector increasingly unattractive to investors. Additionally, should interest rates move higher with stronger economic growth, the yield characteristics of the utilities sector may become less attractive, leading us to believe an underperform rating is most appropriate.
Certainly, if the economic situation deteriorates, the utilities sector could benefit from a search for perceived safer assets, as appears to have happened at the start of the year. Additionally, an improving housing market could result in an increase in electricity needs in developing areas, and we're seeing signs that may be occurring as housing starts have started to creep higher. But we believe these potential positives don't outweigh our concerns and the sentiment shift among investors we believe will be coming in the near future.
Positive factors for the utilities sector:
- Dividend-paying stocks remain attractive as long as yields on conservative fixed- income products remain relatively low. And should economic prospects decline more than currently expected, defensive, dividend-paying stocks could become even more attractive.
Negative factors for the utilities sector:
- Utilization rates of electric and gas utilities have moved down modestly while production has spiked, indicating a potential oversupply issue that could pressure margins.
- Capacity growth has been rising, which has been a sign of underperformance for the sector in the past.
- Accelerating economic growth would likely make the defensive utilities sector less attractive.
- Interest rates should trend higher, making the yield-heavy utilities sector potentially less attractive.
About Schwab Sector Views
Schwab Sector Views were developed by Charles Schwab & Co., Inc.'s ("Schwab's") Investment Strategy Council. Schwab Sector Views are Schwab's outlook on the 10 broad sectors as classified by the widely recognized Global Industry Classification Standard groupings. The GICS structure comprises sectors, industry groups, industries and subindustries. Schwab Sector Views are at the sector level. While Schwab Equity Ratings and Schwab Industry Ratings utilize a disciplined approach that evaluates all stocks (Schwab Equity Ratings) or all industries (Schwab Industry Ratings) in the same manner, Schwab Sector Views uses analytical techniques and methods that vary from sector to sector.
Explanation of columns in the table: The benchmark weights are provided for reference and represent each sector's market capitalization weight in its index.
Schwab Sector Views represent our current outlook on each particular sector. All investors should be well-diversified across all sectors. However, investors who want to tactically overweight or underweight particular sectors may want to consider our three- to six-month relative performance outlook reflected in this column. These views refer only to the domestic equity portion of investors' portfolios.
How should I use Schwab Sector Views?
Investors should generally be well-diversified across all sectors, at or near the respective sector market capitalization weights relative to the overall market (benchmark). However, investors who want to make tactical shifts to those weights with a goal of outperforming the overall market can consider the Schwab Sector Views as a resource. Schwab clients can also use the Stock Screener or Mutual Fund Screener to help identify buy and/or sell stock or mutual fund candidates in particular sectors that they may be underweighted or overweighted in their portfolios.
How to use Schwab Sector Views in conjunction with Schwab Equity Ratings
Sector diversification is an important building block in portfolio construction. Schwab Sector Views are expressed in terms of outperform, marketperform and underperform, and can be particularly helpful in evaluating and monitoring your portfolio composition. Schwab Sector Views can be useful in screening new stock purchases and in identifying portfolio holdings for possible sale. A review of sector weights coupled with individual stock concentration should be a critical measure of equity portfolio diversification. Schwab Equity Ratings provide an objective and powerful approach for helping you select and monitor stocks.
Schwab Sector Views do not represent a personalized recommendation of a particular investment strategy to you. You should not buy or sell an investment without first considering whether it is appropriate for you and your portfolio. Additionally, you should review and consider any recent market news.
The Institute for Supply Management (ISM) Manufacturing Indexis an index based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The ISM Manufacturing Index monitors employment, production inventories, new orders and supplier deliveries.
The Labor Reportis a monthly report compiling a set of surveys in an attempt to monitor the labor market. The Employment Situation Report, released by the Bureau of Labor Statistics, by the U.S. Department of Labor, consists of:
• The unemployment rate - the number of unemployed workers expressed as a percentage of the labor force.
• Non-farm payroll employment - the number of employees working in U.S. business or government. This includes either full-time or part-time employees.
• Average workweek - the average number of hours per week worked in the non-farm sector.
• Average hourly earnings - the average basic hourly rate for major industries.
The Unemployment Rateis the number of unemployed workers expressed as a percentage of the labor force.
Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. The table indicates returns based on gross returns. If commissions and other costs are deducted, the performance would be lower. Past performance is no guarantee of future results.
The GICS was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's. GICS is a service mark of MSCI and S&P and has been licensed for use by Charles Schwab & Co., Inc.
The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.
Diversification strategies do not assure a profit and do not protect against losses in declining markets.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.