FIRST QUARTER 2016

Quarterly
Sector Update
PRIMARY CONTRIBUTORS
Asset Allocation Research Team (AART)
Fidelity Management & Research Company Equity Division
Fidelity SelectCo

 SECTOR UPDATE

What Is Fidelitys Quarterly Sector Update?

The Quarterly Sector Update, including the Sector Scorecard, represents input from three discrete Fidelity investment
teamseach with unique insights about sector investingto present a comprehensive view of the performance potential
of the 10 major equity market sectors.

The Sector Scorecards proprietary methodology measures the relative

attractiveness of each sector against five key factors:
business cycle, fundamentals, relative valuations,
momentum, and relative strength.
The investment teams whose members contribute to the Quarterly Sector Update include:

Asset Allocation
Research Team

Fidelity Management &

Research Company

Fidelity SelectCo

Equity Division

The Quarterly Sector Update is intended as a tool for investors to set context and perspective when evaluating the current state of market sectors. It is
not meant to serve as a direct prediction regarding the future performance of any economic or financial market. It is not intended to predict or guarantee
future investment performance of any sort.

 SECTOR UPDATE

Scorecard: Positives for Tech, Consumer Discretionary, Health

All 10 sectors had positive returns in 2015s final quarter, and six of the 10 sectors beat the S&Ps Q4 gain of 7%. Technology
now reflects constructive signals on all five metrics, with momentum and relative strength turning positive. Materials was the
quarters top performer, but commodity price weakness and ongoing supply/demand concerns still challenge the sector.

Time Horizon View

Longer

Business
Cycle

Sector
Consumer
Discretionary

Fundamentals

Relative
Valuations

Energy

Financials

Health Care

Industrials

Technology

Materials

Momentum

Weight in
S&P 500
Index

Latest
Quarter

Year to
Date

Dividend
Yield

12.9%

5.8%

10.1%

1.5%

10.1%

7.6%

6.6%

2.6%

6.5%

0.2%

-21.1%

3.7%

16.5%

6.0%

-1.5%

1.9%

15.2%

9.2%

6.9%

1.5%

10.0%

8.0%

-2.5%

2.2%

20.7%

9.2%

5.9%

1.5%

2.8%

9.7%

-8.4%

2.4%

2.4%

7.6%

3.4%

5.1%

3.0%

1.1%

-4.8%

3.8%

S&P 500
Returns

7.0%

1.4%

2.1%

Telecom

Performance as of 12/31/15

Relative
Strength

Consumer Staples

Utilities

Shorter

Past performance is no guarantee of future results. Sectors are defined by the Global Industry Classification Standard (GICS); see additional information
in the appendix. Factors are based on historical analysis and are not a qualitative assessment by any individual investment professional. Green portions
suggest outperformance, red portions suggest underperformance, and unshaded portions indicate no clear pattern vs. the broader market, as
represented by the S&P 500. Quarterly and year-to-date performance reflect performance of S&P 500 Sector Indices. It is not possible to invest directly
in an index. All indices are unmanaged. Percentages may not sum to 100% due to rounding. Source: FactSet, Fidelity Investments, as of 12/31/15.

 SECTOR UPDATE

Industries: Top Five & Bottom Five Performers This Quarter

In Q4, 50 of the 67 industries that compose the MSCI USA Investable Market Index (IMI) were positive on a total-return basis,
and 23 industries outperformed the broader market (MSCI USA IMI). All industries within the Health Care and Consumer
Staples sectors had positive Q4 returns. For the most part, industries connected to the Energy sector struggled the most.

Top 5 Industries QTD

Internet &
Catalog Retail

Industrial
Conglomerates

Internet
Software &
Services

Software

Life Sciences
Tools & Services

Sector

Drivers

Consumer
Discretionary

Strong earnings
growth driven by
shift to e-commerce
companies

Multiline Retail

8%

Consumer
Discretionary

Industrials

Corporate
restructuring helped
to drive benchmark
heavyweight

Marine

7%

Industrials

18%

Information
Technology

Favorable secular
tailwinds and solid
organic growth

Road & Rail

15%

Information
Technology

Strong
fundamentals from
legacy software
companies

Health Care

Boost from
government funding
announcement and
M&A speculation

21%

18%

15%

Bottom 5 Industries QTD

Sector

Drivers
Pressures from low
tourism, moderate
weather, and high
inventory levels
Concerns around
declining crude oil
volumes

Lower earnings
expectations amid
weak commodity
demand

7%

Industrials

Textiles, Apparel &

Luxury Goods

5%

Consumer
Discretionary

Weakness due to
low tourism and
unfavorable
currency exchange

Independent Power &

Renewable Electricity
Producers

5%

Utilities

Challenged by lower
power prices

Parent Index: MSCI USA IMI. Past performance is no guarantee of future results. Return data show total return. Source: Morningstar, FactSet, Fidelity
Investments, as of 12/31/2015.

 SECTOR UPDATE

Business Cycle: Intermediate-Term Cycle View

A disciplined business-cycle approach to sector allocation can produce active returns by favoring industries that may benefit
from cyclical trends. By choosing a blended portfolio of select sectors that have historically performed well in the current and
potentially upcoming cycle phasesfor example, Tech, Energy, and Staplesit may be possible to generate excess returns.

Business Cycle Approach to Sectors

Sector
Financials
Consumer
Discretionary
Technology
Industrials

Early

Mid

Late

Recession

++
+

++

+
--

--

Annualized Excess Return

--

Our proprietary model expects the current mid-cycle phase of the

business cycle to be followed by a late- and a recessionary cycle.
The chart illustrates the potential impact of choosing sectors that
historically performed well in those (mid, late, and recession) cycles.

-++

Consumer
Staples

++

Health Care

++

++

Energy

--

++

Telecom

--

Utilities

--

++
-

Equal-Weighted Tech/Staples/Energy Portfolio

10%

--

Materials

Illustrative Tech/Staples/Energy Portfolio

Relative Performance: 19622010

++

5%

0%
Last Two Years of
Mid-Cycle

Last Year of MidCycle

Late Cycle

Past performance is no guarantee of future results. Sectors as defined by GICS. LEFT: Unshaded (white) portions above suggest no clear pattern of overor underperformance vs. broader market. Double +/ signs indicate the sector is showing a consistent signal across all three metrics: full-phase average
performance, median monthly difference, and cycle hit rate. A single +/ indicates a mixed or less consistent signal. Source: The Business Cycle Approach
to Sector Investing, Fidelity Investments (AART), Sep. 2014. RIGHT: For the illustration, we selected a sector that historically tended to outperform the overall market in the current and expected upcoming business cycle phases (mid-cycle: Technology; late cycle: Energy; recession: Staples). The columns show
the average annual return of the hypothetical blended portfolio based on each of the three sectors S&P 500 Sector Index, rebalanced monthly, for the timeperiods shown. This does not imply that a Tech/Staples/Energy portfolio is the ideal combination for these phases nor are they the only sectors that
historically have performed well during these phases. Early cycle not included in analysis because it is not expected to occur in the next several years based
on the business cycle model. See Appendix for more details on methodology and Business Cycle definition. Source: Haver Analytics, Fidelity Investments
(AART), as of 12/31/15.

 SECTOR UPDATE

Fundamentals: Tech and Consumer Discretionary On Top

The Technology and Consumer Discretionary sectors have benefited from positive fundamentals over the past year,
boosted by strong free-cash-flow margins and earnings growth, respectively. Energy continues to have the weakest
fundamentals overall, with persistently low oil prices and unfavorable supply-demand conditions hampering the sector.

EPS Growth (Last 12 Months)

EBITDA Growth (Last 12 Months)

20%

20%

0%

0%

-20%

-20%

-40%

Energy

Telecom

Materials

S&P 500

Cons. Stpls.

Industrials

Utilities

Technology

Cons. Disc.

Energy

Telecom

Industrials

Materials

S&P 500

Utilities

Financials

Cons. Stpls.

Technology

Health Care

Cons. Disc.

Health Care

-40%

-60%

Energy

Utilities

Cons. Stpls.

Cons. Disc.

Materials

Industrials

Health Care

S&P 500

Telecom

-10%

Technology

Financials

Utilities

0%
Energy

0%
S&P 500

10%
Health Care

10%
Materials

20%

Industrials

20%

Cons. Disc.

30%

Technology

30%

Telecom

Free-Cash-Flow Margin (Last 12 Months)

Cons. Stpls.

Return on Equity (Last 12 Months)

Fundamentals: Strong and improving fundamentals historically have been an

intermediate-term indicator of sector performance. Fundamental analysis gives
a view into how each sector is doing in terms of growth and profitability.
EPS = earnings per share, the portion of a companys profit allocated to each outstanding share of common stock. EBITDA = earnings before interest,
taxes, depreciation, and amortization. The Financials sector is not represented in the EBITDA Growth or Free-Cash-Flow Margin charts. Please see the
Glossary and Methodology slide for further explanation. Source: FactSet, Fidelity Investments, as of 12/31/15.

 SECTOR UPDATE

Relative Valuations: Financials, Telecom, Tech Attractive

Technology relative valuations remain compelling, while Financials and Telecom are the least expensive sectors based on
earnings yield and cash-flow yield. Energy looks expensive based on these metrics, but on a P/B basis the sector is at its
cheapest level in 50 years. Valuations for the three best-performing sectors of the yearConsumer Discretionary, Health
Care, and Consumer Staplesare higher but not unreasonable relative to history.

Earnings Yield

Free-Cash-Flow Yield

10-Year Range (excl. top & bottom 5%)

Current

Historical Average

10-Year Range (excl. top & bottom 5%)

Current

Relative Forward Earnings Yield to S&P 500 Index (%)

Relative Free-Cash-Flow Yield to S&P 500 Index (%)

2.0

3.5

1.8

3.0

1.6

2.5

1.4

Historical Average

2.0

1.2

1.5

1.0

1.0

0.8

Utilities

Telecom

Materials

Technology

Industrials

Health Care

Energy

Cons. Stpls.

Utilities

Telecom

Materials

Technology

Industrials

-1.0
Health Care

0.0
Financials

-0.5
Energy

0.2
Cons. Stpls.

0.0

Cons. Disc.

0.4

Cons. Disc.

0.5

0.6

Relative Valuations: On their own, valuations are not necessarily the best indicator
of sector performance, but when combined with other factors, valuations can be
a useful tool in determining the risk-and-reward profile.
Forward earnings yield reflects analysts published earnings-per-share estimates for the next 12 months, divided by market price per share; it is the
inverse of the price-to-earnings (P/E) ratio. Free-cash-flow yield reflects free cash flow divided by market price per share; it is the inverse of the price-tofree-cash-flow ratio. Please see the Glossary and Methodology slide for further explanation. Source: FactSet, Fidelity Investments, as of 12/31/15.

 SECTOR UPDATE

Momentum: Consumer Discretionary, Technology Lead

After a challenging Q3, Consumer Discretionary and Technology rebounded in Q4 and ended 2015 with strong momentum.
Health Care was also a leader, but not to the degree it was at the years mid-point. Energy was the biggest laggard, due to
slowing demand from China and low oil prices. Materials also struggled for the year overall despite a sharp rally in Q4.

Momentum Leaders
Consumer Discretionary
Price Indexed to 100

Momentum Laggards
Health Care

Technology

Energy
Materials
Price Indexed to 100

160

160

150

150

140

140

130

130

120

120

110

110

100

100

90

90

80

80

70
60
Dec-13

Dec-14

Jun-15

12-month review

70

12-month review
Jun-14

Utilities

Dec-15

60
Dec-13

Jun-14

Dec-14

Jun-15

Dec-15

Momentum: Momentum compares the rate of acceleration in the price of securities within
a sector, over time. It can be used to analyze relative sector performance as well as to
evaluate performance for a sector separately from the broader market.
Past performance is no guarantee of future results. Charts show performance of S&P 500 Sector Indices, indexed to 100, from 12/31/13 to 12/31/15.
It is not possible to invest directly in an index. All indices are unmanaged. Source: FactSet, Fidelity Investments, as of 12/31/15.

 SECTOR UPDATE

Relative Strength: Technology, Consumer Sectors Strong

The Tech sectors strength rose steadily in the second half of 2015, while Consumer Staples spiked higher more recently.
Consumer Discretionary also had a good showing. Despite having one of the highest returns for the period, Health Cares
relative strength ended lower than it began, while Energy and Materials continued to decline in the back half of 2015.

Sectors Exhibiting Relative Strength

Cons Disc.
Utilities

Cons. Stpls.
Industrials

Sectors Exhibiting Relative Weakness

Energy
Financials

Technology

Health Care
Telecom

Price Relative to S&P 500 Index

Price Relative to S&P 500 Index

130

130

6-month
review

120

120

Materials

110

110

100
100
90
90

80

80
70
Dec-13

6-month
review
Jun-14

Dec-14

Jun-15

Dec-15

70
60
Dec-13

Jun-14

Dec-14

Jun-15

Dec-15

Relative Strength: This indicator compares the performance of each sector with
the performance of the broad market based on changes in the ratio of the
securities respective prices over time.
Past performance is no guarantee of future results. Charts represent performance of specified S&P 500 Sector Indices relative to the broader S&P
500 Index. It is not possible to invest directly in an index. All indices are unmanaged. Source: FactSet, Fidelity Investments, as of 12/31/15.

 SECTOR UPDATE

Financials: Loan Growth Driving Multiple Expansion?

Within Financials, improving loan growth has historically been a strong indicator of the potential for higher valuations.
Considering that net interest margins for regional banks have been well below historical averages, increases in interest
rates could potentially provide a boost to this group, whose lending earnings are typically reliant on loan spreads.

Loan Growth vs. Financials Valuations

P/B Ratio

Regional Banks Net Interest Margins

Regional Banks - NII/ Avg. Earning Assets
Avg.
Yield of 2-Yr. U.S. Treasury

Loan Growth

3.0

15%

2.5

10%

1.10%

6%

1.05%

5%

1.00%
2.0

5%

4%

0.95%
3%

1.5

0%

0.90%
2%

0.85%
1.0

-5%

1%
.

0.80%
0.75%

0%
Mar-01
Dec-01
Sep-02
Jun-03
Mar-04
Dec-04
Sep-05
Jun-06
Mar-07
Dec-07
Sep-08
Jun-09
Mar-10
Dec-10
Sep-11
Jun-12
Mar-13
Dec-13
Sep-14
Jun-15

Dec-15

Dec-13

Dec-11

Dec-09

Dec-07

Dec-05

Dec-03

Dec-01

Dec-99

Dec-97

Dec-95

Dec-93

Dec-91

-10%
Dec-89

0.5

Left: P/B = price to book. Source: Haver Analytics, as of 11/30/2015. Right: Based on a basket of 46 regional banks. Net interest margin
(NIM) is the ratio of net interest income to invested assets. Source: Bloomberg Finance L.P., FactSet, as of 9/30/2015.

10

Corporate earnings have decelerated from their mid-cycle peaks of late. In such environments, Consumer stocks historically
have beaten most other sectors. Along with Health Care, Consumer Staples and Consumer Discretionary have outpaced the
broader market roughly 60% of the time over the past 50 years, and their overall returns are also higher than the markets.

Percentage of Periods Outperforming,

1964 to Nov. 2015
67%

6.0%

64%
59%

60.0%

55%

5.0%
51%

50.0%

49%

5.1%

4.0%

44% 44% 44%

38%

40.0%

4.6%

3.0%
2.0%

30.0%

1.5%
0.7%

1.0%
20.0%

1.1%
0.3% 0.3%

0.0%
-0.1%

-1.0%

-0.5%

Materials

Telecom

Energy

Industrials

Technology

Cons. Disc.

Cons. Stpls.

-1.8%
Health Care

Materials

Telecom

Utilities

Energy

Industrials

Technology

Financials

-3.0%
Cons. Disc.

-10.0%
Cons. Stpls.

-2.0%
Health Care

0.0%

Utilities

10.0%

Financials

70.0%

Excess Returns, 1964 to Nov. 2015

Left: Calculations based on the odds of outperforming the Russell 3000 Index during any 12-month time frame during the past 50 years. Source: Haver
Analytics, Fidelity Investments, as of 11/30/2015. Right: Calculations based on rolling 12-month relative returns relative to the Russell 3000 Index.
Source: Haver Analytics, Fidelity Investments, as of 11/15/2015.

11

SECTOR UPDATE

Consumer Stocks Tend to Outperform when Earnings Slow

In addition to its favorable historical performance when the markets earnings decelerate, the Consumer Staples sector looks
fairly valued based on its long-term averages. In addition, the sectors return profile has been trending positively recently.
These factors may present a potentially attractive entry point for investors, based on valuation and improving return on equity.

Consumer Staples Relative P/E,

1964 to Nov. 2015
1.6

Consumer Staples Return on Equity,

1964 to Nov. 2015
0.3

1.4
0.25

1.2

0.2

1
0.8

0.15

0.6
0.1

0.4

0.05

Feb-65
Feb-67
Feb-69
Feb-71
Feb-73
Feb-75
Feb-77
Feb-79
Feb-81
Feb-83
Feb-85
Feb-87
Feb-89
Feb-91
Feb-93
Feb-95
Feb-97
Feb-99
Feb-01
Feb-03
Feb-05
Feb-07
Feb-09
Feb-11
Feb-13
Feb-15

0
Feb-65
Mar-67
Apr-69
May-71
Jun-73
Jul-75
Aug-77
Sep-79
Oct-81
Nov-83
Dec-85
Jan-88
Feb-90
Mar-92
Apr-94
May-96
Jun-98
Jul-00
Aug-02
Sep-04
Oct-06
Nov-08
Dec-10
Jan-13
Feb-15

0.2

Calculations based on consumer staples stocks within the Russell 3000 Index. Source: Haver Analytics, Fidelity Investments, as of 11/15/2015.

12

SECTOR UPDATE

Staples: Historically Attractive Valuations and Improving ROE

Glossary and Methodology

Glossary
Bear Market
At least a 20% correction in the stock market.
Cycle Hit Rate
Calculates the frequency of a sector outperforming the
broader equity market over each business cycle phase
since 1962.
Dividend Yield
Annual dividends per share divided by share price.
Earnings before Interest, Taxes, Depreciation, and
Amortization (EBITDA)
A non-GAAP measure often used to compare profitability
between companies and industries, because it eliminates
the effects of financing and accounting decisions.
Earnings per Share Growth
Measures the growth in reported earnings per share over
the specified past time period.
Earnings Yield
Earnings per share divided by share price. It is the inverse
of the price-to-earnings (P/E) ratio.
Free Cash Flow (FCF)
The amount of cash a company has remaining after
expenses, debt service, capital expenditures, and
dividends. High free cash flow typically suggests stronger
company value.
Free-Cash-Flow Yield
Free cash flow (FCF) per share divided by share price. A
high FCF yield often represents a good investment
opportunity, because investors would be paying a
reasonable price for healthy cash earnings.
Full-Phase Average Performance
Calculates the (geometric) average performance of a
sector in a particular phase of the business cycle and
subtracts the performance of the broader equity market.
Idiosyncratic Risk
Risk that is specific to an individual investment and shows
little or no correlation to overall market risk.
Median Monthly Difference
Calculates the difference in the monthly performance of a
sector compared with the broader equity market, and then
takes the midpoint of those observations.

sector performance during a six- to 12-month period.

Price-to-Book (P/B) Ratio
The ratio of a companys share price to reported
accumulated profits and capital.
Price-to-Earnings (P/E) Ratio
The ratio of a company's current share price to its reported
earnings. A forward P/E ratio typically uses an average of
analysts published earnings estimates for the next 12 mos.
Price-to-Sales (P/S) Ratio
The ratio of a companys current share price to reported
sales.
Relative Strength
The comparison of a securitys performance relative to a
benchmark, typically a market index.
Return on Equity
The amount, expressed as a percentage, earned on a
companys common stock investment for a given period.
Risk Decomposition
A mathematical analysis that estimates the relative
contribution of various sources of volatility.
Standard Deviation
Shows how much variation there is from the average
(mean or expected value). A low standard deviation
indicates that the data points tend to be very close to the
mean, whereas a high standard deviation indicates that the
data points are spread out over a large range of values. A
higher standard deviation represents greater relative risk.

Methodology
Business Cycle
The business cycle as used herein reflects fluctuation of
activity in the U.S. economy and is based on Fidelitys
analysis of historical trends.
Fundamentals
Sector rankings are based on equally weighting the
following four fundamental factors: EBITDA growth,
earnings growth, return on equity (ROE), and
free-cash-flow margin. However, we evaluate the
Financials sector only on earnings growth and ROE
because of differences in its business model and
accounting standards.
Momentum
Compares the price change of a sector versus itself over a
12-month period, with a one-month reversal on the latest
month. Persistence in returns can be a useful indicator of

Relative Strength
Compares the strength of a sector versus the S&P 500
Index over a six-month period, with a one-month reversal
on the latest month; identifying relative strength patterns
can be a useful indicator for short-term sector performance.
Relative Valuations
Valuation metrics for each sector are relative to the S&P
500 Index. Ratios compute the current relative valuation
divided by the 10-year historical average relative valuation,
eliminating the top 5% and bottom 5% values to reduce the
effect of potential outliers. Sectors are then ranked by their
weighted average ratios, weighted as follows: P/E: 35%;
P/B: 20%; P/S: 20%; free-cash-flow yield: 20%; dividend
yield: 5%. However, the Financials sector is weighted as
follows: P/E: 59%; P/B: 33%; dividend yield: 8%.

Primary Contributors
Asset Allocation Research Team (AART)
AART is part of the Global Asset Allocation division of
Fidelitys Asset Management organization. AART conducts
economic, fundamental, and quantitative research to
develop asset allocation recommendations for Fidelitys
portfolio managers and investment teams.
Fidelity Management & Research Company Equity
Division
The Equity Division within Fidelity Asset Management
consists of 11 portfolio groups, as well as Select and
Advisor Focus sector portfolios. Each group is responsible
for portfolio management supported by in-depth
fundamental research.
Fidelity SelectCo
SelectCo is a division within Fidelitys Asset Management
organization and is focused exclusively on expanding the
companys 30-year heritage of sector investing to help
meet the evolving needs of investors and advisers for
innovative sector-specific tools, resources, and products.

13

Appendix
Views expressed are as of the date indicated, based on the information available at that
time, and may change based on market or other conditions. Unless otherwise noted, the
opinions provided are those of the authors and not necessarily those of Fidelity
Investments or its affiliates. Fidelity does not assume any duty to update any of the
information.
References to specific investment themes are for illustrative purposes only and should
not be construed as recommendations or investment advice. Investment decisions
should be based on an individuals own goals, time horizon, and tolerance for risk.
This piece may contain assumptions that are forward-looking statements, which are
based on certain assumptions of future events. Actual events are difficult to predict and
may differ from those assumed. There can be no assurance that forward-looking
statements will materialize or that actual returns or results will not be materially different
from those described here.
Past performance is no guarantee of future results.

Please note there is no uniformity of time among phases, nor is the chronological
progression always in this order. For example, business cycles have varied between
one and 10 years in the U.S., and there have been examples when the economy has
skipped a phase or retraced an earlier one.
Market Indices
The S&P 500 Index is a market capitalizationweighted index of 500 common stocks
chosen for market size, liquidity, and industry group representation to represent U.S.
equity performance. S&P 500 is a registered service mark of Standard & Poors
Financial Services LLC. Sectors and industries are defined by the Global Industry
Classification Standard (GICS).
The S&P 500 sector indices include the standard GICS sectors that make up the S&P
500 Index. The market capitalization of all S&P 500 sector indices together composes
the market capitalization of the parent S&P 500 Index; each member of the S&P 500
Index is assigned to one (and only one) sector.

All indices are unmanaged. You cannot invest directly in an index.

MSCI USA Investable Market Index (IMI) is designed to measure the performance of the
large-, mid-, and small-cap segments of the U.S. market. With 2,505 constituents, the
index covers approximately 99% of the free-float-adjusted market cap in the U.S.

Stock markets are volatile and can decline significantly in response to adverse issuer,
political, regulatory, market, or economic developments.

The Russell 3000 Index measures the performance of the largest 3,000 U.S.
companies, representing approximately 98% of the investable U.S. equity market.

Because of its narrow focus, sector investing tends to be more volatile than investments
that diversify across many sectors and companies. Sector investing is also subject to the
additional risks associated with its particular industry.

Sectors are defined as follows: Consumer Discretionary: companies that provide

goods and services that people want but dont necessarily need, such as televisions,
cars, and sporting goods; these businesses tend to be the most sensitive to economic
cycles. Consumer Staples: companies that provide goods and services that people use
on a daily basis, like food, household products, and personal-care products; these
businesses tend to be less sensitive to economic cycles. Energy: companies whose
businesses are dominated by either of the following activities: the construction or
provision of oil rigs, drilling equipment, or other energy-related services and equipment,
including seismic data collection; or the exploration, production, marketing, refining,
and/or transportation of oil and gas products, coal, and consumable fuels. Financials:
companies involved in activities such as banking, consumer finance, investment banking
and brokerage, asset management, insurance and investments, and real estate,
including REITs. Health Care: companies in two main industry groups: health care
equipment suppliers and manufacturers, and providers of health care services; and
companies involved in the research, development, production, and marketing of
pharmaceuticals and biotechnology products. Industrials: companies whose
businesses manufacture and distribute capital goods, provide commercial services and
supplies, or provide transportation services. Technology: companies in technology
software and services and technology hardware and equipment. Materials: companies
that are engaged in a wide range of commodity-related manufacturing.
Telecommunication Services: companies that provide communications services
primarily through fixed-line, cellular, wireless, high bandwidth, and/or fiber-optic cable
networks. Utilities: companies considered to be electric, gas, or water utilities, or
companies that operate as independent producers and/or distributors of power.

Investing involves risk, including risk of loss.

Business Cycle Definition

The typical Business Cycle depicts the general pattern of economic cycles throughout
history, though each cycle is different. In general, the typical business cycle
demonstrates the following:
Early-cycle: economy bottoms and picks up steam until it exits recession, then begins
the recovery as activity accelerates. Inflationary pressures are typically low, monetary
policy is accommodative, and the yield curve is steep.
Mid-cycle: economy exits recovery and enters into expansion, characterized by broader
and more self-sustaining economic momentum but a more moderate pace of growth.
Inflationary pressures typically begin to rise, monetary policy becomes tighter, and the
yield curve experiences some flattening.
Late-cycle: economic expansion matures, inflationary pressures continue to rise, and
the yield curve may eventually become flat or inverted. Eventually, the economy
contracts and enters recession, with monetary policy shifting from tightening to easing.

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Appendix
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