Download the Schwab app from iTunes®Close

Sector Views: Tailwinds and Headwinds

Click to show the transcript

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.

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 or other 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.  Supporting documentation for any claims or statistical information is available upon request.

Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. For more information on indexes please see schwab.com/indexdefinitions.

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison with the market as a whole.

Investing involves risk, including loss of principal.

(0621-1V3J)

Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.