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Sector Views: Tailwinds and Headwinds

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Sector Views: Tailwinds and Headwinds


This axis shows sector exposure to value vs. growth style factors

[Horizonal axis and numbers circled.]


A reading above zero means a sector generally has, for example, higher free cash flow yield (value factor) and lower 5-year sales growth (growth factor) and tends to outperform when investors seek stocks with low valuations rather than growth.


[Horizonal axis with numbers above zero circled.]


Conversely, a sector with a reading below zero might outperform when investors prefer high growth over better valuations.

[Horizonal axis with numbers below zero circled.]


This axis shows sensitivity to interest rate movements.

[Vertical axis and numbers circled.]


A reading above zero indicates that higher rates generally would be favorable for the sector …

[Vertical axis with numbers above zero circled.]


… and vice versa for a reading below zero.

[Vertical axis with numbers below zero circled.]


Relative sector performance has historically correlated to changes in interest rates and style leadership.


Among many influential factors, higher interest rates and investor preference for value would be tailwinds for sectors in the upper right quadrant…

[Upper right quadrant, featuring bubbles representing the Materials, Industrials, Financials and Energy sectors, is shaded in blue.]


… and headwinds for sectors in the other three quadrants to varying degrees.

[The other three quadrants are shaded in blue. Sectors in these quadrants are Information Technology, Consumer Discretionary, Healthcare, Consumer Staples, Utilities, Real Estate, Communication Services.]

How changes in interest rates and style leadership affect stock market sectors.

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